And we're off with Alaska's Q4 earnings - $193 million in adjusted net income, up slightly YOY

Record adjusted net profit of $913 million for the full year, up 8% YOY, while earnings per share were up 11% YOY.

"This is the first quarter that we've spoken since we closed our $4 billion acquisition of Virgin America, and we could not be more optimistic about what the future holds." says Brad Tilden

"We know that simply adding routes isn't how you win in this business... With this in mind, we're adopting Virgin America's mission statement - which is 'Creating an Airline that People Love'" - wise words from Brad Tilden

Lots of lofty discussion of product quality and kumbayah sentiments towards the ex-Virgin America employee 

Kudos to Alaska for boosting dividends by 9%, the fourth increase in 3.5 years. 

Alaska has reduced mainline unit costs for 7 straight years and 14 of the last 15 years. That's an incredible track record, even if some of that has been driven by increasing the number of large 737-900/ER aircraft in the fleet. 

Alaska's pretax margin of 24% would be in the top 15% of industrial S&P; 500 companies. 

The acquisition of Virgin America was financed without any new equity (this is very rare in mega-mergers amongst S&P; 500 companies). Alaska's balance sheet management is without a doubt the best in the business

The integration management office is fully operational, with a goal towards single operating certificate (SOC) in 12 months and a plan to shift to a single passenger management and reservation system by the back half of 2017. 

RASM was up 0.3% for the first positive unit revenue since Q2 2014. 

I wonder if Alaska's Mileage Plan approach of sticking with mileage-based earning will be the frequent flier equivalent of Southwest's Bags Fly Free. Lots of people loved the old mileage based system. 10+% growth in Mileage Plan credit cards and member sign ups says there may be something here. 

Premium Economy will add $50 million or more to revenues in 2017 and grow to an $85 million contribution. 

Alaska is the one carrier that consistently goes back to the well of "look how crappy we were 10 years ago and look how awesome we are now." A great way of deflecting Wall Street off it's usual PRASM obsession. 

Competitive capacity for Q1 2017 is only up 4%, and preliminary January PRASM was down 3%, which isn't great but does say that the worst of Alaska's revenue woes are behind it. 

1/3 of Virgin America Elevate elite customers have signed up Mileage Plan.

Total cash flows from Virgin America Elevate and Mileage Plan were $915 million in 2016. 

Virgin added $15 million of net profits to Q4 and the full year based on 2 weeks of Virgin America being fully merged.

Does Alaska have the second longest industry annual profit streak after Southwest?

CASM excluding fuel was flat for Q4, even with fuel costs up YOY. 

Virgin America's pretax Q4 2016 profit was $61 million and $244 million for the full year, with YOY improvement in both figures. 

Consolidated capacity for 2017 is expected to be up 8.5% YOY, keeping CASM excluding fuel flat YOY. 

Total operating cash flow of $1.5 billion, capital expenditures for the year were $680 million. Alaska is modifying 3 737-700 aircraft into freighters to replace 4 737-400 Combis and 1 737-400 freighter.

Virgin America isn't going to take all 10 A321neos that it has on order, at least at present. I wonder if Alaska will change its tune once it understands just how capable those planes are. The caveat is that because of the west coast hubs, there really aren't many routes where Alaska needs the full range of the A321neo (it doesn't have any trans-Atlantic flying). 

Alaska is hedged to an extent at $50/barrel oil which is helpful in the current environment. 

Oh look, another revenue/yield question. *Yay*

I wonder if Alaska Airlines' mileage program is less profitable than that of peer carriers. Most airlines talk about the top-line (revenue) or bottom-line (profits), Alaska is the first carrier that I've heard talk about cash flows for a mileage program. 

In part that might be because a whopping 19% of Alaska's passengers are partially affiliated with Mileage Plan against 10-12% for peer airlines. That's a worrisome number - even if some of those folks are only paying for half of their flights with miles. That's a lot seats taken up by non-paying customers. 

Most of Alaska's capacity growth in 2017 comes from mid-continent and trans-continent flying, which thanks to the E175 and smaller competitive capacity boosts are more resilient revenue wise. Plus Alaska has the tanking JetBlue PRASM performance to make itself look better in comparison to. 

Alaska feels that the Airbus A320 is "a better east to west airplane" i.e. longer haul flying - this jives with the widely accepted notion that Airbus A320s are better at longer distance flying while Boeing 737s are better on shorter distance routes. 

Nothing has changed on the revenue synergies of $175 million planned with the Alaska-Virgin merger.

Alaska is really hammering the fact that they've adopted Virgin America's nomenclature of "guests" to refer to passengers. There's some logic to the notion that this helps Alaska remain focused on its passengers/customers, and while a small shift, does illustrate that Alaska has in part adopted Virgin America's culture as its own. 

Q2 competitive capacity is flat, which must be music to Alaska's ears.

So there's a revenue threshold that allows Alaska to stop paying the Virgin Group a royalty. Right now it's 1.5% but could dip to 0.5% at 3x Virgin America's current revenue. 

This sort of feels like United's Q3 earnings call - everything is being deferred to investor day. 

Overall, a very strong quarter and full year for Alaska, which continued its stellar track record as a core business. One worrisome note did come out of the call around the notion that 19% of Alaska's customers are at least partially on mileage tickets, which is heavy (even as the mileage program as a whole delivers $915 million worth of cash flow).  Otherwise everyone's eyes will turn to the Virgin America integration. There are some substantial synergies here as per Alaska management, but fundamentally, Virgin America is a lower margin business than Alaska and that margin gap has to be filled with some combination of efficiency improvements and revenue growth. But competitive capacity is pulling back sharply in early and mid 2017, and that should give Alaska the breather that it needs to be able to turn that corner.