Alaska Airlines Sustainability Report 2008-2024

2008–2011: Pre-EU ETS Aviation Inclusion • EU ETS: The EU Emissions Trading System (EU ETS) was extended to include aviation activities starting in 2012. Therefore, Alaska Airlines was not subject to EU ETS compliance during this period. (https://www.easa.europa.eu/en/domains/environment/eaer/market-basedmeasures/eu-emissions-trading-system?utm_source#historic-and-forecastedaviation-emissions-under-eu-ets ) • https://recyclenation.com/2012/10/recycling-flight-alaska-airlines/ • https://www.flightsource.ca/blog/flightdeck/2010/07/23/alaska-airlines-greenerskies-test-flight-lowers-emissions-by-35-percent/ • https://www.twelve.co/post/alaska-airlines-multi-faceted-approach-tobecoming-more-sustainable • China ETS: China's national ETS was not operational for aviation during these years, and Alaska Airlines did not have operations subject to Chinese environmental regulations. • Voluntary Offsets: Alaska Airlines focused on operational efficiency and began exploring sustainable aviation fuel (SAF) options, laying the groundwork for future sustainability initiatives. 2012–2014: EU ETS Implementation and "Stop the Clock" Decision • EU ETS: The EU ETS was extended to aviation in 2012, requiring all airlines operating in Europe to monitor, report, and verify their emissions, and to surrender allowances against those emissions. However, due to international opposition, the EU temporarily suspended the application of the ETS to flights to and from non-European countries under the "Stop the Clock" decision. As Alaska Airlines primarily operated within North America, it was not significantly impacted. (https://climate.ec.europa.eu/eu-action/transport/reducingemissions-aviation_en?utm_source ) • https://condonlaw.com/2014/12/airlines-and-climate-change-the-aviationemissions-problem/?utm_source • https://news.alaskaair.com/newsroom/alaska-air-group-issues-firstcomprehensive-corporate-sustainability-report/?utm_source • China ETS: Still not applicable to Alaska Airlines. • Voluntary Offsets: The airline continued to invest in fleet modernization and improved fuel efficiency, contributing to reduced emissions without engaging in formal offset programs. 2015–2019: Strategic Sustainability Planning • EU ETS: Alaska Airlines maintained its position, with no direct involvement due to its operational focus outside the EU. • https://sustainability.uw.edu/blog/2016-10/csr-thursday-alaskaairlines?utm_source • https://www.alaskaair.com/content/about-us/sustainability-report?utm_source • https://www.triplepundit.com/story/2018/alaska-ranked-most-sustainablenorth-american-airline/10506?utm_source • https://news.alaskaair.com/awards/2018-dow-jones-sustainability-index-northamerica/?utm_source • https://www.prnewswire.com/news-releases/alaska-airlines-asks-guests-tohelp-reduce-inflight-plastic-waste-through-fillbeforeyoufly300917374.html?utm_source • China ETS: Not applicable.( https://www.homaio.com/post/what-are-theaviation-emissions-covered-by-the-eu-ets?utm_source ) • Voluntary Offsets: In 2019, Alaska Airlines announced its commitment to achieving net-zero carbon emissions by 2040, outlining a five-part strategy that included fleet renewal, operational efficiency, SAF, novel propulsion, and credible carbon offsetting technologies. 2020–2024: Implementation and Partnerships • EU ETS: No direct compliance required, as Alaska Airlines' operations remained primarily within North America. • China ETS: Still not applicable. • CORSIA: Alaska Airlines began preparations to comply with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a global market-based measure to offset international aviation emissions. https://news.microsoft.com/2020/10/22/alaska-airlines-and-microsoft-signpartnership-to-reduce-carbon-emissions-with-flights-powered-by-sustainableaviation-fuel-in-key-routes/?utm_source https://news.alaskaair.com/alaska-airlines/2020-lift-reportsustainability/?utm_source • Voluntary Offsets and SAF: o In 2023, Alaska Airlines partnered with CHOOOSE to offer passengers the option to purchase SAF credits or support nature-based climate projects, integrating these choices into the booking process. o Mileage Plan members could earn Elite-Qualifying Miles by purchasing SAF credits, incentivizing sustainable choices. o The airline secured agreements to purchase approximately 200 million gallons of SAF to be delivered between 2025 and 2030, demonstrating a significant investment in sustainable fuel alternatives. o https://news.alaskaair.com/newsroom/alaska-airlines-commits-tocarbon-waste-and-water-goals-for-2025-announces-path-to-net-zero-by2040/?utm_source o https://news.alaskaair.com/alaska-airlines/alaska-airlines-2022sustainability-report/?utm_source o https://news.alaskaair.com/sustainability/10-highlights-alaska-airlinesannual-sustainability-report/?utm_source o https://news.alaskaair.com/company/2024-year-in-review/?utm_source Throughout 2008–2024, Alaska Airlines has progressively enhanced its sustainability efforts, focusing on operational efficiency, fleet modernization, and investments in sustainable aviation fuel. While not directly involved in the EU ETS or China ETS due to operational scope, the airline has actively engaged in voluntary initiatives and global schemes like CORSIA to reduce its environmental impact. ATTACHED ARE DOCUMENTS RELATED TO SUSTAIABILITY EFFORTS MADE BY ALASKA AIRLINE DURING (2008-2024) In 2008, Alaska Airlines and its sister carrier Horizon Air reported total carbon dioxideequivalent (CO₂e) emissions of approximately 1,598,031 metric tons. This figure encompasses emissions from both airlines' operations and was disclosed in their 2012 Sustainability Report. (https://studylib.net/doc/8802928/alaska-air-groupsustainability-report-2012?utm_source ) Emissions Intensity and Efficiency Between 2004 and 2008, Alaska Airlines and Horizon Air achieved a 23% reduction in CO₂ emissions per revenue passenger mile (RPM). This improvement was primarily due to: • Fleet Modernization: Transitioning to more fuel-efficient aircraft, including the Boeing 737 Next Generation series and Bombardier Q400 turboprops.( https://studylib.net/doc/8802928/alaska-air-group-sustainability-report2012?utm_source ) • Operational Enhancements: Implementing fuel conservation measures such as optimized flight paths and weight reduction strategies.( https://worldairlinenews.com/2010/07/23/alaska-airlines-greener-skies-testflight-lowers-emissions-by-35/?utm_source ) These initiatives contributed to a significant decrease in emissions intensity, aligning with the airlines' commitment to environmental stewardship. Fleet Transition A notable step in reducing emissions was the complete phase-out of the McDonnell Douglas MD-80 aircraft in August 2008. These older models were replaced with more fuel-efficient Boeing 737-800s, leading to improved fuel economy and lower emissions. Ground Operations and Infrastructure In addition to airborne efforts, Alaska Airlines focused on reducing emissions from ground operations. By 2008, the airline had implemented procedures to minimize the use of auxiliary power units (APUs) at gates, opting instead for ground power sources. This shift reduced fuel consumption and associated emissions during aircraft turnaround times. (https://worldairlinenews.com/2010/07/23/alaska-airlines-greenerskies-test-flight-lowers-emissions-by-35/?utm_source ) Improving our environmental footprint ALASKA AIR GROUP 2009 ENVIRONMENT REPORT WELCOME Alaska Air Group 2009 Environment Report IN THIS REPORT ABOUT THIS REPORT 2009 PERFORMANCE HIGHLIGHTS Who we are OUR ENVIRONMENT LOOKING FORWARD Invitation for Feedback Alaska Air Group | 2009 Environment Report Welcome to Alaska Air Group’s 2009 Environment Report. Our goal in publishing this report is to communicate openly with employees, customers, investors, analysts and other key stakeholders about our environmental impact. The hope is that this report will serve as a foundation for increased understanding of the challenges asso ciated with continued environmental improvement and aid in the search for innovative solutions. 2 about this report Alaska Air Group’s first corporate Environment Report is structured around communicating Alaska Air Group’s commitment to leadership and continuous improvement in environ mental performance; openly discussing the key impacts, opportunities, and challenges in our industry; and describing our performance and initiatives in each of the significant areas of environmental impact. Within this structure, we also convey the character, values, and strengths of our people and organizational culture. We are just beginning the process of assessment and reporting. A major task over the past two years has been developing appropriate key performance indicators, measurement processes, and infrastructure for data collection and analysis as a foundation for under standing where we are, establishing baseline data, reporting meaningful information, and developing improvement plans. This report focuses on the environment. The time period covered by this report is January 1, 2009, to December 31, 2009, for Alaska Air Group’s two airline carriers: Alaska Airlines and Horizon Air. Where data is available, we describe environmental impacts for two to six years prior to 2009. We have made every effort to accurately and fully assess and transparently report all significant environmental impacts and issues, focusing primarily on those impacts within our direct control. Our determination of significant issues is based on the knowledge of internal staff experts, common industry practices, and informal feedback from customers, employees, and other stakeholders. In the future, we will build more rigorous stakeholder engagement processes to define material issues, obtain feedback on our progress, and dialogue about critical issues and opportunities. Alaska Air Group | 2009 Environment Report 3 2009 PERFORMANCE HIGHLIGHTS ALASKA AIR GROUP (COMBINED) total GREENHOUSE GAS EMISSIONS AND EMISSIONS INTENSITY, 2004–2009 ALASKA AIRLINES FUEL-REDUCTION EFFORTS, 2006–2009 Alaska Airlines and Horizon Air’s greenhouse gas emissions intensity has decreased steadily since 2004. This represents a 23% reduction in CO2e* intensity over the past six years and a 10% reduction in total CO2. Over the past four years, Alaska Airlines has invested in more fuel-efficient aircraft and aerodynamic improvements, instituted fuel-saving procedures, and initiated flying efficiencies that now conserve over 35 million gallons of fuel per year. 4.05 3.95 205.2 3.94 3.85 220 4.04 210 3.93 3.91 200 3.86 197.5 3.75 190 192.2 3.65 183.0 3.55 171.4 180 3.56 170 3.45 160 2004 CO2 Equivalent 2005 2006 2007 2008 2009 ı fuel reduction over four years * CO2e, or carbon dioxide equivalent, is a measure for describing the impact of a given type of greenhouse gas (GHG). Other GHGs, such as methane and nitrous oxide, are expressed in terms of CO2e. 19.5 19 18.5 18 73% 4% total four-year savings 17.5 16.5 8% 140M 2006 Fuel Reduction HORIZON AIR INFLIGHT COLLECTION OF RECYCLABLE MATERIALS, 2009 Horizon Air initiated inflight recycling efforts in the 1980s. Our flight attendants now collect over 83% of all recyclable materials generated during inflight service. Approximately 70% of all the food and beverage service waste generated in the air is recycled on the ground. Horizon Air’s inflight recycling program diverts an estimated 300 tons of waste from landfills each and every year. ● Fleet Transition Investments ● Weight Reduction Programs ● Preconditioned Air (PCA) at Gates ● Required Navigation Performance (RNP) Programs ● Winglets (700, 900) ● Other (Cost Index Flying, Direct Routes, etc.) 20 17 CO2 Metric Tons of CO2 e per Million RPM contributions to fuel reduction 20.5 Gallons/1,000 RPM CO 2 (million metric tons) 230 220.1 Intensity Ratio (metric tons CO 2e per million rpm) 4.15 2007 2008 FUEL reduction percentages 3% 10% 2% 2009 Business as Usual ALASKA AIRLINES INFLIGHT RECYCLING CAPTURE RATE, 2008–2009 17% Recycling capture rates declined in 2009 after a temporary suspension of the program due to H1N1 concerns. Improvement is a key priority in 2010. 2009 83% Alaska Air Group | 2009 Environment Report 60% 2008 REcycling collection rate ● Total Collected ● Total Uncollected 32% Collection Rate 4 Who we are Fueled by Jet A, powered by people Alaska Air Group | 2009 Environment Report 5 Who we are Fueled by Jet A, powered by people in this section Message from Bill Ayer, Chairman and CEO About Alaska Air Group Our Core Values Alaska Air Group Corporate Environmental Policy Alaska Airlines and Horizon Air realized long ago that this business is about people more than planes. Our core values of “Alaska Spirit” and “Horizon Heart” embody this knowledge. These corporate values not only encompass our direct commitment to our customers and employees, but they also set Alaska Air Group on a path to continually embrace the challenges of an ever-changing world, including the necessity for continued environmental improvements. Alaska Air Group | 2009 Environment Report 6 Who We Are MESSAGE FROM BILL AYER Chairman and CHIEF EXECUTIVE OFFICER With our history rooted in the magnificent beauty of Alaska and the Pacific Northwest, caring for the environment has always come naturally to us. However, like most corporations, over the past decade we have gained a deeper understanding of customers’ and other stakeholders’ increasingly high expectations for environmental stewardship and corporate responsibility. Bill Ayer Chairman and CEO Alaska Air Group The traveling public, corporate customers, investors, employees, communities, and regulatory bodies all have increasing requirements for transparency and disclosure about environmental impacts. Additionally, these stakeholders expect evidence of proactive reduction of greenhouse gas emissions, energy utilization, materials, water resources, and waste. We aim to meet or exceed these expectations. We also believe there are significant business benefits and opportunities in optimizing our environmen tal performance. Many of these benefits can be shared with customers, improve employees’ work lives, and increase our contribution to the community and society. “Alaska Air Group’s board of directors, executives and employees have a shared vision to continually strengthen our environmental performance and become an environmental leader in the domestic airline industry.” Alaska Air Group’s board of directors, executives, and employees have a shared vision to continually strengthen our environmental performance and become an environmental leader in the domestic airline industry. Our strategic decision to upgrade Alaska Airlines and Horizon Air’s fleets with newer aircraft, pioneer ing use of next-generation flight guidance technology, investment in more efficient ground systems and vehicles, and programs to reduce excess weight onboard have made Alaska Airlines and Horizon Air domestic leaders in fuel Alaska Air Group | 2009 Environment Report 7 Who We Are | Message from Bill Ayer, Chairman and CEO efficiency. These efforts grew at first from grassroots activities and cost-cutting programs. In 2008, however, Alaska Airlines and Horizon Air began evaluating our environmental impact and formalizing initiatives to reduce our footprint. This report describes the results of those efforts and the major programs at each airline to address our carbon footprint, aircraft and vehicle emissions, energy use and conservation, resource conservation and recycling, noise pollution, and compliance. It represents a commitment to continually assess our environmental impacts and performance, and identify areas for improve ment. And it allows us to communicate our successes, strategy, and challenges to customers, employees, and other stakeholders, while providing a structure for more clearly defining our plans and monitoring our future progress. Brad Tilden, President, Alaska Airlines “There are more and more people that this planet has to support each year, so it’s imperative that we each have as small a footprint as possible. I’m proud of Alaska’s progress with our very fuel-efficient fleet, our winglets, and with our industry-leading flight decks, which allow for the most direct routings possible. But there is much more that we can and should be doing.” We have a foundation of initiatives and accomplishments that we can be proud of. Now, we are committed to moving our environmental performance and corporate responsibility to the next level. Jeff Pinneo President and CEO, Horizon Air Bill Ayer Chairman and Chief Executive Officer, Alaska Air Group Alaska Air Group | 2009 Environment Report “‘Horizon Air Country’ is a region of unsurpassed natural beauty, and we’re committed to treasuring and protecting it. This is reflected in our long-term decisions, such as our use of quiet aircraft with lowest-in-class emissions, as well as in our day-today activities, like our award-winning onboard recycling efforts. These result in outcomes that current and future generations will benefit from—something we’re all quite proud of.” 8 Who We Are ABOUT ALASKA AIR GROUP Alaska Air Group, Inc., is the holding company for Alaska Airlines and Horizon Air, Seattle-based carriers that collectively serve more than 90 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada, and Mexico. Alaska Airlines, which accounts for approximately 88% of Alaska Air Group revenues, has a fleet of 112 Boeing 737 jets serving 50 des tinations. As the ninth largest carrier in the United States, Alaska Airlines oper ates from hubs in Anchorage, Alaska; Los Angeles, California; Portland, Oregon; and Seattle, Washington. Alaska Air Group also owns regional carrier Horizon Air, which flies to approximately 50 destination cities in the western United States, Canada, and Mexico, with a fleet of 18 jets and 40 Q400 turboprops. Horizon Air’s hubs are Seattle; Portland; Spokane, Washington; and Boise, Idaho. Group’s 2009 full-year net income was $121.6 million. Alaska Airlines and Horizon Air have dif ferent brand identities, defined shared values, infrastructures, and initiatives. Alaska Airlines’ pioneering spirit of inno vation and integrity is complemented by Horizon Air’s heartfelt caring and con tinuous improvement for the customer. Alaska Air Group is committed to high standards of environmental performance and compliance with all regulations. Ultimate responsibility for environmental issues rests with our Alaska Air Group executive team. Environmental Affairs for both Alaska Airlines and Horizon Air are managed through our joint services Environmental Affairs Department. The Environmental Affairs Department reports directly to the chief ethics & compliance officer. Alaska Air Group’s fleet is among the most fuel‑efficient in the nation, which translates to one of the lowest carbon footprints per revenue passenger mile (RPM). Together, Alaska Airlines and Horizon Air service more than 90 destinations in the United States, Canada, and Mexico. Alaska Airlines and Horizon Air are headquartered in Seattle, Washington. Together, the two airlines employ more than 13,000 people. Alaska Air Alaska Air Group | 2009 Environment Report 9 Who We Are OUR CORE VALUES Alaska Airlines and Horizon Air each have a set of core values that define their unique character, guide decision-making and behavior, and underlie our relationships with customers, the community, the environment, and each other. Alaska Airlines Core Values Alaska Spirit Alaska Spirit is the heart of Alaska Airlines. It springs from our rich heritage where aviation plays a vital role in the life of every resident. Throughout our system, the Alaska Spirit defines the unique character of Alaska Airlines. Our fun-loving, energetic, and adventurous personality flows from this spirit, as does our belief in service and community involvement. From our Alaska Spirit comes the pride, the passion, and the perseverance that sets Alaska Airlines apart. Caring Caring about and helping people is the soul of Alaska Airlines. We regularly go the extra mile to help our customers, our community, our environment, and each other with friendliness, caring, and genuine concern. We believe our lives are enriched by individual acts of kindness and compassion. Professionalism Integrity As proven professionals, we each bring a high level of individual skills, expertise, and commitment to our work. We take great pride in the fact that our individual and collective accomplishments have earned broad respect and a reputation for safe, reliable, quality service. Our actions will reflect our absolute commitment to ethical and honest behavior. When faced with uncertainty, we will always use our best judgment to do the right thing. Our bias toward action and our readi ness to adapt to change and to master difficult challenges exemplify the Resourcefulness Alaska Air Group | 2009 Environment Report “can-do” heritage of Alaska Airlines. We embrace an atmosphere where hard work, initiative, and teamwork are a tradition, and where creativity and innovation flourish. Horizon Air Shared Values Heart Partnership We value the partnership of talented individuals combining their efforts to achieve results beyond the sum of their independent contributions. Partnership at Horizon Air is built on a foundation of trust, cooperation, and mutual respect. Innovation/Initiative “Heart” is what defines the unique spirit and character of Horizon Air— a family of energetic, optimistic, and enthusiastic people who enjoy what they do. From their heart comes the pride, commitment, and, above all, the caring that truly sets Horizon Air apart. We encourage initiative, innovation, and creativity throughout the organization. Drive, determination, and hard work— coupled with the active pursuit of new and creative solutions—are essential to Horizon Air’s continued success. Integrity Continuous Improvement Integrity is the cornerstone value of Horizon Air. That means we have an uncompromising commitment to honesty and fairness—to being ethical, trustworthy, and responsible in all we do. We seek excellence in our business and are committed to an environment of continuous development, learning, and improvement. We embrace change as a means to grow, both corporately and individually. 10 Who We Are ALASKA AIR GROUP CORPORATE ENVIRONMENTAL POLICY Alaska Airlines and Horizon Air believe that environmental responsi bility is an essential part of being a responsible corporate citizen and a natural fit with our corporate values and our customers’ expectations. Our vision is to build cultures at both companies where we fully integrate sustainable environmental practices into our business of providing safe, reliable air transportation with best-inclass service and the best customer experience. Furthermore, we recog nize that environmental responsibility can positively impact corporate profit ability by minimizing operating costs through efficient use of resources, enhancing the company’s image, and minimizing risk and legal liability. For these reasons, Alaska Air Group views environmental responsibility as an important part of our overall corporate culture. In accordance with our vision and values, the management and employ ees of Alaska Airlines and Horizon Air shall strive to: • Conduct business with integrity, ensuring compliance with all envi ronmental laws and regulations. • Ensure the responsible use of energy throughout our business through improvements in energy efficiency, and building design, and the procurement of energyefficient equipment. • Integrate environmental consid erations into daily operational and decision-making processes throughout the company. • Replace harmful chemical products with nontoxic alternatives, when ever feasible. • Foster a culture of environmental responsibility among employees and management by promoting awareness of environmental con cerns, actions, and responsibilities. • Improve employee environmental performance through procedures, awareness, training, and recogni tion of excellence. Alaska Air Group | 2009 Environment Report ENVIRONMENTAL LEADERSHIP In 2009, the Alaska Air Group leadership team made a strategic commit ment to measurably reducing its impact on the environment and becoming an environmental leader in the domestic airline industry. In July 2009, Alaska Air Group executives chartered a Green Initiative with three specific goals as a core element of our strategic business plan: 1. Reducing emissions from fuel consumption. 2. Reducing emissions from heating and electricity consumption in buildings. 3. Reducing use of nonsustainable resources, and recycling inflight and building waste materials. • Maintain strict internal environ mental practices and policies everywhere we do business. • Reduce, reuse, and recycle our materials to the greatest extent feasible and procure recycled supplies wherever appropriate. • Collaborate with our suppliers and vendors to adopt effective environ mental practices. • Endeavor to exceed required levels of compliance wherever possible. • Maintain an open and honest dialogue with our employees and stakeholders about the environmen tal performance of our operations. • Continually improve environmental policies, programs, and performance, based on the results of an internal environmental audit program. 11 OUR ENVIRONMENT Call us fuel-efficiency trailblazers Alaska Air Group | 2009 Environment Report 12 Our Environment Call us fuel-efficiency trailblazers in this section Overview of Environmental Issues Our Carbon Footprint Materials and Waste Additional Environmental Topics The airline industry is a tough and competitive business environment. But we never lose sight of the other environment—the one in which our families and customers live. That’s why the focus of our environmental stewardship has been on minimizing our carbon footprint and impact on the places we serve. We do this, in part, by reducing emissions from airplane engines and ground equipment, conserving energy in our buildings, and eliminating waste in all areas of our operations. Alaska Air Group | 2009 Environment Report 13 Our Environment OVERVIEW OF ENVIRONMENTAL ISSUES Our goal at Alaska Air Group is to focus our efforts on the most important areas of environmental impact, where we have the greatest opportunity to effect positive change. Our strategy and vision emphasize improvements on the two key environmental impacts of highest concern: Carbon Emissions The vast majority (~99%) of carbon dioxide (CO2) emissions generated by our operations are from the combustion of fossil fuel by our aircraft fleet. To a lesser extent, emissions are also released through burning of fuel to power our ground support fleet vehicles and provide heating, cooling, and lighting in our ground facilities. The single greatest challenge for Alaska Air Group—and the entire airline industry—is that our service relies on burning fossil fuels. This is in a business context of global and national pressures and agreements regarding carbon footprint reductions and increasing investor concerns about financial risks of carbon exposure in corporations they are investing in. Additionally, individual consumers are increasingly concerned about the negative impacts of climate change and their personal carbon footprint; and many corporate clients proactively are working to reduce carbon emissions across the entire life cycle of their product/service delivery, including transportation of people and goods. This makes reducing greenhouse gas emissions a strategic priority for all airlines. CO2 emissions can currently be reduced in the airline industry by these two primary methods: modifying or changing the aircraft, or flying more efficiently. A third method, farther out on the horizon, is to use an alternative or more carbon-efficient fuel. Materials and Waste A significant number of supplies are needed to serve our combined 24 million sources of greenhouse GAS emissions in the United States Emissions from aviation make up only 2% of the total greenhouse gas emissions in the United States. Though this number may appear small, we recognize that we can and should continue to limit our impact. 1% 2% 25% 34% Percentage of U.S. Greenhouse gas emissionS 5% 6% 8% ● Noncommercial Aviation ● Commercial Aviation ● Electric Utilities ● Industry 19% ● Agriculture ● Commercial ● Residential ● Transportation Source: U.S. EPA data, 2005 Alaska Air Group | 2009 Environment Report 14 Our Environment | Overview of Environmental Issues passengers per year. From cocktail napkins to lubricating oil and toner cartridges, these items are used and disposed of each day at our facilities. Although individual items may seem small or inconsequential, when multiplied by 24 million passengers, materials, resource use, and waste add up. There are many opportunities to reduce, reuse, and recycle these wastes, although each presents its own unique challenges. Because of the noncentralized nature of our oper ations, and the differing opportunities for recycling and procurement in each location, initiating waste recycling and reduction programs can be challenging. A concerted group effort between our employees, our contractors, and the airports we serve is required to implement a successful waste reduction and/or recycling program. We also report on our efforts to manage noise. Noise may not always be thought of as an “environmental” issue for many people, but it can be an unpleasant byproduct of air travel for surrounding communities at many airports. Upgrading to newer aircraft and U.S. Federal Aviation Admin istration (FAA) approval of quieter and more efficient flight paths present opportunities to reduce the noise impact of our operations. A concerted group effort between our employees, our contractors, and the airport is required to implement a successful waste reduction and/or recycling program. Safe operations and FAA regulations necessitate the application of deicing fluids during icy conditions. How ever, these procedures can impact stormwater runoff, management of which depends on airport deicing collection systems. We take these environmental impacts seriously and are proud of the prog ress we have made. We also recognize that there’s more to do. In this report, we accurately describe our performance and improvement efforts regarding each of these issues. Here is our story thus far in our journey toward more sustainable aviation. Alaska Air Group | 2009 Environment Report Employees around the system collect and recycle a wide variety of materials, including paper, aluminum, plastics, stretch wrap, packing peanuts, toner cartridges, fluorescent light tubes, pallets, computer equipment, used oil, antifreeze, scrap metal, and batteries. 15 Our Environment Our Carbon Footprint • Ground support vehicle fuel combustion. • Electricity usage and heating/ cooling in our leased and owned buildings. All Scope 1 and Scope 2 emissions were inventoried for our carbon foot print. (Scope 1 emissions are those from direct combustion of fossil fuels, and Scope 2 emissions are indirect Alaska Air Group | 2009 Environment Report 4.00 230 3.00 210 2.00 190 1.00 170 0.00 150 2004 2005 Alaska Airlines Emissions 2006 2007 2008 2009 ı Alaska Airlines Intensity Ratio Horizon AIR Greenhouse gas EMISSIONS and Air EMISSIONS INTENSITY, 2004–2009 0.60 310 0.45 270 0.30 230 0.15 190 0.00 150 2004 2005 Horizon Air Emissions 2006 2007 2008 2009 Intensity Ratio (metric tons CO 2e per million rpm) Summary of Our Assessment Methodology As demonstrated in the graph at right, for the past six years, Alaska Airlines and Horizon Air have consis tently reduced their carbon intensity (tons of carbon dioxide per unit of productivity). Although carbon intensity decreased by 23%, the total amount of carbon was reduced by 10% from 2004–2009, due to increases in air travel demand and operational capacity. ALASKA AIRLINES Greenhouse gas EMISSIONS and Air EMISSIONS INTENSITY, 2004–2009 CO 2 (million metric tons) • Combustion of jet fuel during aircraft operations. Together, Alaska Airlines and Horizon Air have steadily reduced the intensity of their carbon emissions by 23% since 2004. CO 2 (million metric tons) Emissions evaluated in the prepara tion of this footprint include: emissions generated in the produc tion of electricity that we consume.) The inventory included all emissions for which Alaska Air Group has operational control, including both of its wholly owned subsidiaries— Alaska Airlines and Horizon Air. Activity data from selected emission sources were compiled by Alaska Air Group personnel and evaluated by a third-party environmental consultant. Intensity Ratio (metric tons CO 2e per million rpm) Alaska Air Group is committed to calculating and reducing its environ mental impact. As an essential first step in this commitment, Alaska Airlines and Horizon Air conducted a greenhouse gas inventory of our operations for the years 2004–2009. ı Horizon Air Intensity Ratio Emissions were calculated using Tier 2 methodology for the majority (99%) of our emissions—those from the combustion of jet fuel. 16 Our Environment | Our Carbon Footprint AIRCRAFT EMISSIONS Fuel conservation has always been an Fuel EFFICIENCY RELATIVE TO COMPETITORS important goal for Alaska Airlines and Horizon Air. Not only is it our largest cost—currently accounting for 36% of our budget—but it also accounts for approximately 99% of our carbon footprint. Over the years, our fuel reduction efforts at Alaska Airlines Alaska Airlines ranks #1 among the and Horizon Air have resulted in two 10 largest domestic carriers in fuel of the most fuel-efficient—and carbon- efficiency per available seat mile for efficient—aircraft fleets in the industry. domestic and international travel. Our current fuel and emission reduc tion programs fall into three categories (Data Source: DOT Form 41 and 298C) aimed at the highest leverage areas for substantive improvements: #1 WHAT WE FLY Fleet composition Aerodynamic improvements THE WAY WE FLY Flying efficiencies and flight planning Ground flight support THE FUEL WE USE Alternative fuel sources Alaska Air Group | 2009 Environment Report monitoring fuel conservation programs At Alaska Airlines, we have been closely tracking and monitoring fuel conservation programs for years. The fuel and financial savings we have estimated in the following pages are based upon data supplied from equipment manufacturers and Alaska Airlines’ aircraft operational records. This data represents results from Alaska Airlines only. Horizon Air has also been implementing numerous fuel conservation measures; however, they were not centrally tracked and managed. In January 2010, Horizon Air joined the fuel metric reporting program, with formats that duplicate those of Alaska Airlines as part of an effort to better measure future fuel conservation programs. We’ve achieved our most dramatic percentage impacts in fuel and emission reductions through our investments in fleet composition and aerodynamic improvements. These investments have reduced greenhouse gas emissions every year since we made them. While we have already taken the steps that yield the greatest fuel efficiency results, going forward, we will continue to look for every opportunity—no matter how big or small—to further conserve fuel and reduce emissions. These efforts include continuing to transition to ever more fuel-efficient fleets and implementation of enhanced flight capabilities to reduce unnecessary fuel burn. 17 Our Environment | Our Carbon Footprint WHAT WE FLY Alaska Airlines and Horizon Air have invested more than $750 million to replace their aircraft fleets with the most fuel-efficient aircraft available. Fuel Consumption (Gallons / Passenger) ALASKA’s jets most fuel-efficient in operation today 18 12 16.49 15.36 15 11.16 11.65 737-900 737-800 A320 10.76 12.75 13.12 737-200 737-700 737-400 A319 12.63 12.38 9 6 3 MD-80 DC-9 140 172 seats 157 seats 149 seats 182 seats 124 seats 144 seats 122 seats 140 seats 125 seats Jets used by Alaska Airlines Other comparable jets Fuel Consumption (Gallons / Passenger) Horizon’s aircraft among the most fuel-efficient in operation today 12 10.6 The Successes 9 6 Petroleum-based aviation fuels are the only available fuels in today’s market. There are numerous research and development projects under way on alternate sources of aviation fuels. However, there are currently no alter natives to petroleum-based fuels and none are expected to be commercially viable in the near future. The lowesthanging (but most expensive) fruit in terms of reducing fuel use and subsequent emissions is to simply buy fuel-efficient aircraft. Other opportunities include modifying the aircraft to increase aerodynamics and fuel efficiency and decreasing the weight of aircraft equipment. 5.8 6.2 7.2 7.1 6.7 7.3 7.7 3 Q-400 CRJ900 E190 CRJ700 Q200 CRJ200 E170 B1900 76 seats 88 seats 99 seats 70 seats 37 seats 50 seats 72 seats 19 seats Aircraft used by Horizon Air At Alaska Airlines and Horizon Air we’ve changed our fleet inventory and modified aerodynamic components to increase fuel efficiency. Fleet Transition The Boeing 737-800 jet and the Bombardier Q400 turbo prop are the aircraft of our future. Beginning in 2006 and concluding in 2008, Alaska Airlines replaced its fleet of MD-80 aircraft with more fuel-efficient Boeing Next-Generation 737s. As a result of its fuselage, wing, and engine design, the 737-800 and 737-900 are two of the most fuel-efficient jet aircraft available, consuming 18% less fuel compared to an MD-80. This results in an improved fuel efficiency of hundreds of gallons per flight hour. As of December 2009, Alaska Airlines’ all737 fleet consists of 51 737-800s and 12 737-900s, 55% of the fleet. Transi tioning from MD-80s has resulted in an annual fuel savings of approxi mately 22 million gallons per year. Other comparable aircraft With an average fleet age of only 7.5 years and 5.8 years, respectively, Alaska Airlines and Horizon Air operate two of the youngest, most fuel-efficient aircraft fleets in their class. Alaska Air Group | 2009 Environment Report 18 Our Environment | Our Carbon Footprint | What We Fly At Horizon Air, we are transitioning from a combined fleet to an all-Q400 fleet. Our current fleet consists of Bombardier CRJ700 regional jets and Q400 turboprops. The 76-seat Q400 is 30% to 40% more fuel-efficient than a comparable jet. Horizon Air originally announced our fleet transition in April 2008. However, due to the recession, we renegotiated the purchase schedule for the new Bombardier Q400. The remaining 18 Bombardier 70-seat CRJ‑700 jets are expected to be phased out by the end of 2012. Winglets To further improve the aerodynamics of our aircraft, Alaska Airlines is using winglets (turned-up extensions at the tips of the wings) to increase fuel efficiency by 3% to 5%. All of our 737-800 aircraft come equipped with winglets, and we have retrofitted all of our eligible 737-700s and 737-900s. That translates into approximately 100,000 fewer gallons of fuel consumed per aircraft each year. We estimate the total fuel savings from winglets to be 2.2 million gallons in 2009. Through Alaska Airlines and Horizon Air’s investments in modern and efficient aircraft fleets and aerodynamic upgrades, such as winglets, we save over 30 million gallons of fuel per year. Weight Reduction Each pound flown has a cost in terms of fuel usage. To reduce fuel consumption, we’ve put our fleet on a weight-loss program. Examples of Alaska Airlines’ weightreduction efforts include using lighter catering carts, removing bilge insu lation blankets, and reducing the amount of potable water that is boarded on each flight. Alaska Air Group | 2009 Environment Report Above: Flying on a Horizon Air Bombardier Q400 turboprop, affectionately known as a “Green Machine,” is roughly equivalent to driving in a car that gets 64 miles per gallon. A Q400 is 30% to 40% more efficient than a comparable-sized jet. Below: Alaska Airlines is using winglets, like the one shown here, to further increase aircraft fuel efficiency by 3% to 5%. That translates into approximately 100,000 fewer gallons of fuel consumed per aircraft each year. 19 Our Environment | Our Carbon Footprint THE WAY WE FLY We’ve done almost all we can in terms of fleet upgrades and aerodynamic improvements to increase our aircraft fuel efficiency. The next best way to save fuel and reduce emissions is to fly the shortest possible distance between two points. Air space modernization programs, such as those described below, currently offer our next greatest opportunity for reducing fuel use and decreasing associated emissions. The Challenge Modifying existing route structures or aircraft operations requires a coordi nated effort between the airline, the FAA, and/or the local airport. The Successes Altogether, in 2009 the aircraft fuel efficiency initiatives described in this section saved the airlines over 35 million gallons of fuel and reduced expenses by more than $70 million. The amount of fuel conserved in 2009 also lessened Alaska Air Group’s carbon dioxide emissions by nearly 335,000 metric tons. That’s the equivalent of taking 64,000 cars off the road or heating nearly 37,000 houses for a year. Required Navigation Performance Alaska Airlines has been a leader in efficient flying since we pioneered the development of Required Navigation Performance (RNP) flight guidance technology in the mid-1990s. Alaska Airlines remains the only major domestic carrier with a 100% RNPequipped fleet and fully trained crews. RNP technology, which uses the global positioning system (GPS), allows aircraft to fly more direct routes and at lower minimum ele vations with pinpoint accuracy. The use of RNP also allows more direct and efficient landing approaches and results in fewer weather-related cancellations and diversions. RNP flying conserved more than 250,000 gallons of fuel in 2008. Since 1996, we have introduced similar RNP procedures at 45% of the airports in the state of Alaska, as well as cities such as Palm Springs, Portland, and Alaska Air Group | 2009 Environment Report In our five West Coast airports alone, PCA usage is expected to reduce CO2 emissions by 75 million pounds per year. Preconditioned air units (PCAs), like the one pictured above, use 10 times less fuel than a typical 737’s onboard auxiliary power unit. 20 Our Environment | Our Carbon Footprint | The Way We Fly Washington, D.C. We are currently laying the groundwork to extend RNP technology to even more cities in 2010. In 2006, Horizon Air became the first regional carrier to be certified for RNP approaches. On December 30, 2009, Horizon Air became the first scheduledservice passenger carrier to operate a flight using Wide Area Augmentation System (WAAS) technology. WAAS takes RNP technology a step further by using additional satellites that monitor GPS satellite signals. It then corrects for any errors in GPS satellite position. This foolproof navigation performance system reduces fuel burn by allowing pilots to fly straighter flight paths and by providing greater flexibility in choosing alternate airports in the event of a diversion. Cost-Index Flying Cost-index flying uses onboard computer systems to calculate the cost effects of flying slow versus fast to obtain the most economical speed. Alaska Airlines used cost-index flying to lower its overall cruise speeds, reducing average fuel consumption by 10 to 40 gallons per trip. This equated to a savings of approximately 1 million gallons in 2009. Horizon Air imple mented cost-index flying in 2008 for both the CRJ and Q400. is parked, instead of using the aircraft auxiliary power unit (APU), which is the small turbine engine on board the aircraft. A PCA burns approximately 10 times less fuel than a typical 737’s onboard APU. Single-Engine Taxi Instead of using both jet engines while taxiing to and from the runway, Alaska Airlines has initiated single-engine taxi procedures to save fuel. In 2009, by expanding this program to many of our larger airports, we have estimated fuel savings of 260,000 gallons per year. This is now an available procedure systemwide for Alaska Airlines. This is, however, subject to conditions at the airport and contingent on taxi times. It is not feasible at smaller airports, which typically have short taxi times. In 2008, Alaska Airlines started using ground power units instead of aircraft APUs at our 14 busiest airports. Approximately 80% of Alaska Airlines’ gates are equipped with some sort of PCA equipment that allows them to reduce the use of the APU. Our eventual goal is to reduce APU use by 80% on the ground. We saved an estimated 740,000 gallons of fuel in 2008 and 2.7 million gallons of fuel in 2009. Preconditioned Air Units Alaska Airlines and Horizon Air are making greater use of ground power and mobile preconditioned air units (PCAs) for aircraft cabin venting, cooling, and heating while the aircraft Alaska Air Group | 2009 Environment Report Q Routes In 2004, Alaska Airlines and Horizon Air partnered with the FAA to develop parallel flight routes to the San Francisco Bay and Los Angeles Basin airports. These routes, identified as “Q,” follow one-way, direct flight paths from Seattle, Portland, and Vancouver to specific airports in the Bay and L.A. areas. Compared to the previous routes, the Q routes save over 217 flight miles a day and almost 200,000 gallons of fuel per year. Optimized Profile Descent Also known as Continuous Descent Approach, this is a procedure in which aircraft maintain a continuous descent angle during landing. This method, rather than the traditional step-down approach, is designed to reduce fuel consumption and noise during the landing phase of a flight. In March 2009, Alaska Airlines initiated an FAA-approved procedure to allow our planes to follow an optimized descent into the Anchorage airport. A more gradual descent approach to Anchorage will save an estimated 30,000 gallons of fuel per month. Turboprops on Turbojet Routes In 2008, Horizon Air, working with the FAA, developed procedures to allow Q400 aircraft on traditionally turbojet arrival routes. Those procedures have reduced fuel and emissions by delay ing aircraft descents and maintaining 21 Our Environment | Our Carbon Footprint | The Way We Fly more efficient cruise speeds in congested airspace. Since that time, we’ve successfully implemented those procedures in Seattle, Los Angeles, and Vancouver. On some routes, the savings averages 39 miles—while also keeping the aircraft at much higher, more fuel-efficient altitudes. Electronic Flight Bag The Electronic Flight Bag (EFB) is an electronic tablet-style computer device that brings information and flexibility to the flight deck. It allows flight crews to perform flight management tasks more easily and efficiently with less paper. Common EFB benefits include paper savings, weight (and therefore fuel) savings, early satellite weather detection, and efficient reporting of flight time elements. Horizon Air replaced its heavy, paper-intensive flight manuals with EFBs in 2008 in an effort to conserve paper and fuel and to enhance safety and on-time performance. A similar program is being evaluated at Alaska Airlines. FAA Next Generation The FAA’s Next Generation Air Transportation System (NextGen) is a plan to modernize the national airspace system through 2025, by replacing the current radarbased air traffic control system with satellite-based technology, enabling more efficient flight routes. These more efficient routes will use less fuel and reduce greenhouse gas emissions. According to the Air Transport Association, this more efficient air navigation system will trim fuel use and greenhouse gas emissions by 10% to 15% nationally. Under the “Greener Skies” project (see next page), we are taking a leading role in bringing NextGen operational and environmental benefits to the Seattle region. We will also work to replicate those benefits where possible in other locations throughout our system. Alaska Air Group | 2009 Environment Report Optimized Profile Descent, also known as Continuous Descent Approach, is a navigation procedure that reduces both noise and carbon emissions during the landing phase of a flight. Traditional step-down approach Airport optimized profile descent Low Power Airport 22 Our Environment | Our Carbon Footprint | The Way We Fly Greener Skies Alaska Airlines tested new flight pro cedures to reduce our environmental impact during airport approaches on the west side of Seattle-Tacoma International Airport (Sea-Tac) in summer 2009. The project is being conducted in partnership with the Port of Seattle, the Boeing Company, and the FAA. Dubbed “Greener Skies,” it is focused on using satellite-based flight guidance technology (RNP) pioneered by Alaska Airlines to operate more efficiently and reduce aircraft fuel consumption, emissions, and noise in the Puget Sound region. Alaska Airlines and Horizon Air are seeking FAA approval of the procedures, which could be used by all properly equipped carriers at Sea-Tac. This project places SeaTac, our primary hub, on the leading edge of the national move to a modern, satellite-based air transpor tation system. Testing began June 16, 2009, on an Alaska Airlines 737-700 during a non commercial flight. Typically, aircraft follow a lengthy approach pattern and make a series of stair-step descents before landing. Using RNP satellite guidance technology and a continu ous descent, aircraft can fly from cruise altitude to an airport runway along a shorter, more direct path at low power. In addition to fuel and emissions savings, the new procedures will reduce overflight noise exposure for an estimated 750,000 people living within the affected flight corridors. RNP and continuous descent proce dures are part of the Next Generation Air Transportation System, the FAA’s plan to modernize the National Air space System through 2025. This initiative will increase efficiency, enhance safety, and reduce environ mental impacts. If you’d like to get involved or if you have questions about the Greener Skies initiative, contact Megan.Lawrence@alaskaair.com. Sea-Tac Airport West Side Approach ● Typical Flight Path ● RNP Flight Path Greener Skies Annual Benefits Fuel Saved: 2.1 Million Gallons Emission Reduction: 22,400 Metric Tons (≈ 4,100 Cars) Noise Exposure Reduction: ≈ 750,000 People Alaska Air Group | 2009 Environment Report 23 Our Environment | Our Carbon Footprint The Fuel We Use Alternative jet fuels represent an opportunity for the future. There are exciting initial successes in the development of alternative, lesscarbon-intense jet fuels. Alaska Air Group is participating in various projects to support the development, testing, and commercialization of alternative fuels. Through our mem bership with organizations such as the Sustainable Aviation Fuel Users Group, of which we are currently the only domestic airline participating member, we have pledged to consider fuels that minimize biodiversity impacts; require minimum land, water, and energy to produce; and don’t compete with food or freshwater resources. We are committed to driving sustainability practices into the global fuel supply chain. At this time, however, the technology and capacity have not been adequately developed for biofuels to fully substitute for fossil fuels. Alaska Air Group | 2009 Environment Report Alaska Air Group made recent headlines based on our support of alternative fuels and our participation in related projects. Alaska Airlines joins Boeing’s biofuel group AltAir Fuels and 14 airlines airlines sign sign 14 biofuel MOU Puget Sound Business Journal || July July 13, 2009 Flightglobal | December 15, 2009 World’s Largest Airlines Commit to Use Biofuel in Jets Alaska Airlines joins Sustainable Aviation Fuel Users Group Earth & Industry | January 6, 2010 Biofuels Digest || July July 14, 2009 24 Our Environment | Our Carbon Footprint CARBON EMISSIONS FROM VEHICLES The remaining 1% of our carbon emissions comes from two sources: fuel burned by our fleet of ground support equipment (GSE) vehicles and consumption of fuel and electricity to heat, cool, and light our buildings. Ground Support Equipment Our GSE consists of forklifts, automobiles, and aircraft service vehicles, such as bag gage tugs and belt loaders. GSE are typically powered by petroleum-based fuels and therefore contribute to our overall carbon footprint. Over the years, both Alaska Airlines and Horizon Air have initiated a variety of programs to move away from fossil-fuel-powered GSE and explore cleaner alternatives. Electric Vehicles We are currently replacing fuel-burning vehicles with electric equipment where it makes economic, safety, and compliance sense. Horizon Air’s strategy has been to methodically convert our vehicle fleet, wherever practical, from fuel-powered to electric. A large proportion of Horizon Air’s vehicle fleet is located at airports where the infrastructure is available to support its growing fleet of electric GSE. As of January 1, 2010, over 65% of Horizon Air’s station-based ground support vehicle fleet consists of electric vehicles. At Alaska Airlines, the GSE fleet is approximately 10% electric. Many of the airports where Alaska Airlines operates do not currently have the capacity to recharge large fleets of electric vehicles. And at many of Alaska Airlines’ airports, we do not manage any GSE at all; they are owned and operated by contracted ground service providers. Alaska Airlines has been testing and evalu ating electric vehicles for our largest operation in Seattle, Washington. We look forward to working with the Port of Seattle as it upgrades airport infrastructure to accommodate the placement of vehicle recharging stations over the next three years. Alternative Fuels in Vehicles Over the past three years, Alaska Airlines has converted or replaced a portion of our gasoline-powered GSE fleet with Alaska Air Group | 2009 Environment Report Work-From-Home Program Approximately 45% of Alaska Airlines reservations agents and 75% of Horizon Air reservations agents participate in a work-from-home program. This eliminates the need for these employees to drive to work and removes more than 300 cars from our local roadways each day. cleaner-burning propane units or hybrid GSE. In August 2009, we were one of eight airlines that signed an agreement to buy renewable synthetic diesel vehicle fuel at Los Angeles International Airport. This deal will provide our contractor’s vehicle fleet with biodiesel beginning in 2012. This biodiesel will boast a carbon footprint of almost zero and will also greatly reduce particulates and sulfur emitted by GSE. Ground support Vehicle power source 65% 10% + of Horizon Air’s vehicles are electric of Alaska Airlines’ vehicles are electric 25 Our Environment | Our Carbon Footprint | Carbon Emissions from Vehicles and Buildings CARBON EMISSIONS FROM BUILDINGS Building Electricity, Heating, and Cooling Although small by compari son to the footprint of our aircraft fleet, our building operations contribute to overall carbon emissions through the use of energy that provides heating, cooling, and lighting. Many of our facilities are leased from local airports, where we have limited control over heating, ventilating, and air-condition ing systems; however, opportunities are available in our owned and longterm-lease buildings, such as our corporate headquarters. Energy Consumption Our energy conservation program is still in its fledgling state. We’ve begun conserv ing energy in the buildings we own by upgrading to more efficient light fixtures, lighting systems, and airconditioning and heating systems throughout the Alaska Airlines and Horizon Air operations. We’ve recently adopted LEED® principles into Alaska Airlines and Horizon Air’s standard facilities contract language. LEED, an acronym for Leadership in Energy and Environmental Design, is a tool for improving the quality of buildings, minimizing their impact on the environment, and reducing operating costs. Although none of our buildings are currently LEED certified, we are in the process of obtaining LEED certification for our first construction project in 2011. Horizon Air’s strategy has been to methodically convert our vehicle and equipment fleet, wherever practical, from fuel-powered to electric. As of 2010, over 65% of Horizon Air’s GSE runs on electricity instead of fossil fuel. Alternative Energy We are also com mitted to investigating the use of alternative energy sources to heat and/or power our buildings. Our target is to complete a feasibility study and implementation plan for at least one facility by the end of 2010. Alaska Air Group | 2009 Environment Report We’re replacing our fuel-burning ground support equipment (GSE) with electric equipment (like these aircraft pushback tractors, shown above) wherever practicable. 26 Our Environment MATERIALS AND WASTE Alaska Air Group has a strategic goal to reduce the use of nonsustainable resources and to recycle inflight and office waste materials. Achieving this goal depends on innovation and collaboration by employees in many functional areas, key suppliers, air port management and staff, and regulatory bodies. Alaska Airlines and Horizon Air employees are making sure that our commitment to environmental stew ardship is more than just talk—by pursuing corporate initiatives, such as collection of recyclable materials on flights, to grassroots efforts, such as the waste reduction initiatives launched by individual station employ ees in offices, at airports, and in maintenance facilities around our system. Throughout the company, employees challenge themselves and each other to find ways to reduce, reuse, and recycle resources. The following describes some of our recycling and waste reduction programs along with some of our challenges. Did you know An estimated 7.5 million pounds of trash is generated by the U.S. aviation industry every day. Why are Alaska Airlines and Horizon Air’s recycling programs different? Horizon Air owns and operates catering facilities in Seattle, Portland, and Boise, where the majority of waste is deplaned. This gives Horizon Air tighter control of how the waste is managed, and ultimately, recycled. Additionally, due to the shorter duration of Horizon Air flights, the waste stream is more consistent and contains less food and food packaging wastes. About 92% of the materials used in service are made from recyclable materials, such as plastic, aluminum, or paper. At Alaska Airlines, approximately 60% to 70% of our waste is deplaned and disposed of at contract flight kitchens. Alaska Airlines’ flights are longer, with a more complex food and beverage service than a typical Horizon Air flight. First-class meals, buy-on-board meals, and multiple beverage services increase the overall waste totals and decrease the percentage of reclaimable materials. Natural Resources Defense Council 2006 research found that 75% of that trash is recyclable, but only 20% reaches a recycling center. Alaska Air Group | 2009 Environment Report 27 Our Environment | Materials and Waste IN THE AIR Materials Waste We have recently committed to replacing our current inflight servic eware (materials used during cabin food and beverage service) and other products with more sustainably sourced alternatives. For years, our inflight cocktail napkins have been printed on 100% recycled content. Now, we are looking for more sus tainably sourced and biodegradable hot beverage cups and main cabin cutlery. Additionally, we are working with our bottled water supplier (Athena) to provide water in 50% recycled-content bottles. Most of our flying public is conscious of the volume of waste that is gener ated in a single flight, and many ask what and how much is recycled. In this area, we have some great success stories—and some great challenges. Horizon Air recognized for recycling efforts the success At Horizon Air, we have had a long and successful history of collecting and recycling inflight waste, with focused attention since the mid1980s. Horizon Air currently recycles 69% (by weight) of all waste generated during inflight service. Flight atten dants collect newspapers, magazines, aluminum cans, plastic cups, and plastic and glass bottles from pas sengers for recycling. Wine corks, cardboard, shrink wrap, coffee grounds, and aluminum and plastic pop rings associated with inflight service are recycled at Horizon Air’s main food and beverage locations in Seattle, Portland, and Boise. Alaska Air Group | 2009 Environment Report On May 14, 2008, the Port of Portland honored Horizon Air with an Aviation Environmental Excellence Award for its efforts in recycling items used during inflight service. 28 Our Environment | Materials and Waste | In the Air The challenge Horizon Air’s flight attendants capture 83% of all recyclable materials (plastic, aluminum, and glass) generated during inflight service. Alaska Air Group | 2009 Environment Report Alaska Airlines is no less concerned about inflight waste reduction. In 2008, we began our co-mingled inflight recycling program. We originally focused on collecting and recycling inflight waste at SeattleTacoma International Airport, in support of our broader goal of increas ing the recycling recovery rate of all Alaska Airlines food service waste. We chose our Seattle kitchen as our starting point for monitoring and implementing our inflight recycling program for two reasons: Our Seattle contract catering kitchen is our largest and busiest and manages the majority of Alaska Airlines inflight waste and catering materials, and the Seattle area has a well-developed foundation and marketplace for co-mingled recyclable materials. In 2009 in Seattle, flight attendants captured 32% by weight of recyclable materials generated in flight. This fell off significantly from the 60% collection rate we measured in 2008, the first year we implemented the program. One of the key contri butors to the decline in our collection efforts occurred in summer of 2009, when we temporarily suspended our recycling program in response to H1N1 virus concerns. Unfortunately the recycling program was not fully resumed as planned. We are committed to fixing this prob lem and increasing our recovery rate. In 2010, we’re setting an ambitious target of 100% collection and recovery of all inflight recyclable materials systemwide. 29 Our Environment | Materials and Waste | In the Air “Our inflight recycling efforts have been among our greatest points of pride for as long as I can remember— through them, we’ve helped care for the planet while giving countless customers yet another reason to think favorably of us.” Jeff Pinneo, President and CEO, Horizon Air Another challenge remains in improv ing the percentage of collected material that is, in fact, recycled by our catering kitchens. Alaska Airlines contracts with food service kitchens in 23 locations. Food service waste is deplaned and managed at all contract catering kitchens, but currently only seven of these facilities recycle the materials generated by Alaska Airlines. Our analysis shows four key contributing factors to this lack of buy-in: 1. Limited ability at the local level to collect and handle recyclable materials. Not all states and municipalities have the infra structure to support robust recycling programs. 2. Limited staff on short turnaround timelines. Alaska Air Group | 2009 Environment Report How do we measure our waste? Alaska Airlines has an “Onboard Waste Green Team” composed of members from the Flight Attendant Group, Catering, and Fleet Service. The team works with assistance from local airports, such as Portland and Seattle, to perform periodic waste assessments. During a waste assessment, the team dons disposable coveralls, gloves, and boots to gather waste from the aircraft and beverage carts, then sorts the waste by type (aluminum, paper, nonrecoverable, etc.) and weighs the end results. This helps us evaluate how much of the waste materials could be recycled and how much is collected for recycling by the inflight staff. 3. Limited dock space to place recycling compactors. 4. Most kitchens service international flights, which by current regulation must incinerate or autoclave all of their regulated wastes, so many kitchens do not have a practice of recycling. Alaska Airlines will continue to advocate for and encourage contract flight kitchens and airports to set up recycling programs. We will also evaluate the feasibility of deplaning inflight waste at the airport rather than sending it back to the catering kitchens in the food service carts. 30 Our Environment | Materials and Waste ON THE GROUND Materials As two of the early leaders in e-ticketing and ticketless travel, Alaska Airlines and Horizon Air have eliminated thousands of tons of excess paper. In December 2008, both Alaska Airlines and Horizon Air eliminated paper ticket jackets. This saves approximately 10 million ticket jackets, or roughly 850 pulp trees, per year. We have also continued to reduce printed material through the condensing or co-branding of required forms and converting to electronic format, such as electronic airway bills. In the past five years, we’ve eliminated over 30% of the paper forms we use to conduct business. There are many oppor tunities to further expand these paper-saving initiatives throughout the company—for example, many of our operational programs currently rely heavily on paper. We look forward to future progress in transitioning to paperless systems. We also have taken steps toward incorporating sustainability criteria into our procurement process for evaluating the purchase of new products and services; however, this effort is still in the early stages of maturity. By eliminating paper ticket jackets, Alaska Airlines and Horizon Air save 10 million ticket jackets, or about 850 pulp trees, a year. Alaska Air Group | 2009 Environment Report Waste Office and airport buildings partici pate in varied recycling programs (dependent on municipal-level capa bilities)—generally paper, aluminum, and plastics are collected. Other materials that we recycle around our system include stretch wrap, packing peanuts, toner cartridges, fluorescent light tubes, pallets, computer equip ment, used oil, antifreeze, scrap metal, and batteries. Recycling of office and airport waste materials is currently decentralized, with program responsibility delegated to local managers. We are working on ways to evaluate and measure our efforts in order to improve the collection and recycling of these materials. Although our office facilities already participate in waste recycling programs, we will continue to identify opportunities to expand and streamline recycling capabilities throughout our system. Alaska Airlines Line Maintenance employees in Seattle recycle approximately 4,000 steel oil cans per week. 31 Our Environment ADDITIONAL ENVIRONMENTAL TOPICS Deicing An additional area of environmental concern is deicing fluid management. Operating in cold climates requires a plan to ensure that frost/ice buildup on aircraft wings does not compromise flight safety. Today’s industry standard for ensuring safe flights during winter weather involves spraying aircraft sur faces with a diluted mixture of ethylene glycol or propylene glycol. These chemicals mix readily with water and snow. The ability of glycol to biodegrade quickly after use is both positive and negative in terms of environmental impact. On the plus side, it is relatively nontoxic and does not remain in the environment for an extended period of time. On the minus side, the quick biodegradation may remove oxygen from local waterways and harm aquatic life. Opportunities for reducing deicing fluid are restricted by FAA regulations, aircraft manufacturer procedures, and available technology. Collecting and managing runoff is constrained by airport design and operations and available technology. At many large airports, the stormwater runoff is collected and treated; however, many smaller airports do not have deicing collection systems. In partnership with local airport authorities, Alaska Airlines and Horizon Air follow numerous best management prac tices aimed at reducing the volume of deicing fluid runoff—such as deicing pads, vacuum trucks, ramp scrubbers, etc. All employees who deice are given training in the local procedures and best management practices for preventing stormwater pollution at each airport we serve. Noise Alaska Airlines and Horizon Air maintain a strong focus on reducing airplane noise and its impact on the communities we serve. Our noise reduction program focuses on three areas: improved technology, effective land use management, and noisereducing operational procedures. Alaska Air Group | 2009 Environment Report Examples of our actions to reduce noise levels include the following: • Fleet modernization is a key com ponent to noise reduction. Our oldest and noisiest planes have been retired. Our current fleet is among the youngest and quietest in the United States. Our entire fleet meets or exceeds federal noise certification standards. • Actively pursue FAA approval of quieter landing procedures, such as Optimized Profile Decent (OPD). • We actively participate in discus sions with airports regarding land use and operating procedures to minimize noise impacts to surrounding areas. • By working with local airport authorities and the FAA, we have helped to develop and use noisereducing takeoff procedures as our standard procedure for all flights. • Horizon Air’s Q400 aircraft has a cumulative 25.9 dB noise level below the published EPA Stage 4 Aircraft Noise Standards. Compliance Alaska Air Group recognizes that environmental compliance is funda mental to running a successful business and has structured the Corporate Compliance Office to include Environmental Affairs. The director of environmental affairs, who is supported by three environ mental managers, reports directly to the chief ethics & compliance officer. The director and each manager are responsible for environmental com pliance within designated regions of the United States, Canada, and Mexico. The Environmental Affairs Department ensures compliance with all federal, state, and local environ mental laws and regulations. It also develops corporate environmental policy, provides technical guidance to internal operating departments, conducts environmental training, performs audits, and reports 32 Our Environment | Additional Environmental Topics environmental performance to upper management and the Alaska Air Group Board of Directors. Employee Engagement No amount of corporate activity is possible without the engagement of its employees, and this report would not be complete without mention of the remarkable contributions being made by hundreds of individuals throughout the company on behalf of our planet. Employee Education Employees who work at our airports and with chemical products complete several hours of environmental train ing every year. Training covers the basics of waste management, pre venting water pollution, handling hazardous materials, and preventing and responding to hazardous mate rials spills. Selected subcontractor staff are also trained to our high standards. In 2009, both airlines instituted sustainability training for new employees. Additionally, through the efforts of individuals and local “Green Teams,” more employees are keeping environ mental issues top of mind. Employee Involvement Alaska Airlines and Horizon Air are committed to serving our communi ties by developing meaningful and enduring relationships with organiza tions representing diverse causes and concerns, including environmental ones. In addition to our corporate giving programs, our employees give generously of their own time, talent, and treasure to a variety of organiza tions in the communities we serve and many do so by volunteering for environmentally focused organizations. We encourage our employees to be involved in their communities by offering the following programs: Alaska Air Group | 2009 Environment Report Under our Dollars for Doers program, our employees are given $10 per hour by the company to be donated to the organization(s) for which they volunteer, up to $1,000 per year, per employee. Our Matching Gift Program brings the company and individual employees together in support of organizations our employ ees have strong relationships with. Under this program, Alaska Airlines and Horizon Air will match employee contributions to nonprofit institutions or organizations. Washington, and Oregon, the Washington Wildlife and Recreation Coalition, as well as other environ mental organizations, such as the Alaska Raptor Center. We’ve recently added the National Forest Foundation to our charity miles donation website. For more information on how you can contribute your extra mileage plan miles to an environmental charity, please visit our website at www.alaskaair.com/as/www2/ company/csr/charity-miles.asp. Charitable Giving Alaska Airlines and Horizon Air Corporate Giving support health and human services, arts and cultural programs, and education and environmental organizations. We focus on communities we serve and where a significant number of our employees live or work. Alaska Airlines and Horizon Air are also proud to be associated with The Nature Conservancy of Alaska, The Alaska Airlines/Horizon Air Seattle Green Team held an e-Cycle event on Earth Day, April 22, 2009. Employees brought in hundreds of old computers, television sets, and other electronic waste from home that were responsibly reused or recycled. 33 LOOKING FORWARD We can see for miles and miles— and that’s not good enough Alaska Air Group | 2009 Environment Report 34 looking forward We can see for miles and miles— and that’s not good enough in this section Goals and Commitments for 2010 and Beyond Summary Alaska Air Group | 2009 Environment Report Being good stewards of our environment is not only good business—it’s the right thing to do. We’re seeking to make meaningful changes to minimize any environmental impact, and our efforts are centered on reducing emissions from fuel consumption in the air and on the ground. We’ve already made significant improvements, but there is more to be done. Our ambitious goals for 2010 and beyond demonstrate that we’re not resting on any past accomplishments. And we’ll keep raising the bar as we improve our ability to monitor environmental impacts and track our progress. 35 Looking Forward GOALS AND COMMITMENTS FOR 2010 AND BEYOND Alaska Air Group’s strategic commit ments are to measurably reduce our impact on the environment and become an environmental leader in the domestic airline industry. Our Green Initiative strategic objective has three specific goals, summarized earlier in this report: We will continue to develop our strategic management of environ mental goals, setting explicit targets, leading initiatives, and monitoring our progress to achieve both break through solutions and build continuous improvement into our operations and business processes. 1. Reducing emissions from fuel consumption. Specific goals for the near future are provided in the table on the following pages. 2. Reducing emissions from heating and electricity consumption in buildings. We are commited to becoming an environmental leader in the domestic airline industry and to measurably reducing our impact on the environment. 3. Reducing use of nonsustainable resources and recycling inflight and workplace waste materials. In the future, we will continue to invest in enhancing the efficiency of our 737 fleet (such as the 737-800, shown above) as well as move to an all Q400 fleet—the most fuel-efficient aircraft in its class. Alaska Air Group | 2009 Environment Report 36 Looking Forward | Goals and Commitments for 2010 and Beyond Impact Area Project Name Description Reduce emissions from fossil fuel consumption Fly more efficiently Greener Skies Obtain FAA approval to fly Required Navigation Performance procedures, being designed under the Seattle Greener Skies project, at least during low-traffic periods, in 2011. This project represents a partnership between Alaska Airlines/Horizon Air, the Port of Seattle, the FAA, and The Boeing Company. The purpose of the project is to bring quieter, more fuel-efficient approach paths to Seattle-Tacoma International Airport, saving equipped airlines more than 2 million gallons of fuel and 22,400 metric tons of CO2 annually, as well as reducing noise exposure for hundreds of thousands of people in the Puget Sound region. Alaska Airlines | Horizon Air Implement enhanced flight-planning capabilities in order to reduce the amount of additional fuel loaded on each flight, above what is required to safely conduct the flight. The below capabilities will be implemented by year-end 2010 as part of this fuel efficiency effort: Flight Plan Review Implement a system by year-end 2010 to provide closer estimates of fuel boarded and used for each flight. Improved fuel planning can mean less fuel burned and emissions produced to carry additional fuel. Safety always remains the paramount consideration when deciding how much fuel to board. Alaska Airlines Aircraft Performance Monitoring Implement a program by year-end 2010 to track aircraft perfor mance as it relates to fuel consumption and efficiency. The program allows staff to be alerted if an aircraft’s fuel efficiency changes. Alaska Airlines Improved Plan Takeoff Weight Prediction Implement by year-end 2010 a system to review the variability of bag counts for weekly and seasonal fluctuations to improve estimated planned takeoff weights. More accurate planning can reduce the amount of unnecessary fuel loaded. Safety always remains the paramount consideration when deciding how much fuel to board. Alaska Airlines Flight Planning Implement by year-end 2010 the new flight-planning features for Alaska Airlines to optimize the fuel efficiency of flight routes. The flight-planning system can dynamically calculate routes that utilize wind direction and speed to determine the most fuel-efficient flight path. Alaska Airlines Alaska Air Group | 2009 Environment Report 37 Looking Forward | Goals and Commitments for 2010 and Beyond Impact Area Project Name Description Promote the development and adoption of sustainable aviation fuels Lead Northwest regional effort to identify best practices related to the responsible development and commercialization of sustainable aviation fuels. Alaska Airlines | Horizon Air Address emissions on the ground Continue negotiations regarding the purchase of renewable jet fuel and diesel derived from camelina. Alaska Airlines | Horizon Air Participate in the Port of Seattle GSE Consortium. Seattle-Tacoma International Airport (SEA) has a goal of adapting and upgrading infrastructure to accommodate electric vehicle charging stations by second quarter 2012. Alaska Air Group will increase the percentage of its electric GSE in SEA, including bag tractors, gate pushbacks, and belt-loaders, as this infrastructure becomes available. Alaska Airlines | Horizon Air Reduce emissions from heating and electricity consumption in buildings LAX Board Room Obtain LEED certification on LAX Board Room by year-end 2011. Corporate Headquarters HVAC upgrades Upgrade and install more efficient heating/cooling systems at Alaska Airlines Corporate Headquarters by year-end 2010. Alaska Airlines Reduce use of nonsustainable resources and recycle inflight waste Inflight recycling Increase the recycling rate of inflight waste with a target of 100% by year-end 2010. The focus is on both the collection of recyclable materials inflight and the recycling of such materials once deplaned. Alaska Airlines Inflight serviceware Identify inflight serviceware products that can be replaced with organic, sustainable, recyclable, or compostable alternatives and initiate a replacement plan by year-end 2010. Alaska Airlines Alaska Air Group | 2009 Environment Report Alaska Airlines | Horizon Air 38 Looking Forward SUMMARY At Alaska Air Group, we’re committed to proactively applying our pioneering spirit of innovation and our deep caring for customers and the environment to the continual pursuit of more sustain able air transportation. Environmental performance and leadership are prior ities for Alaska Air Group. We have always cared about the environment and living up to our corporate responsibility, but in light of emerging global issues and higher expectations of business, we are taking it to the next level. Moving toward more sustainable air transportation will require intensive focus and the creative solutions of Alaska Air Group leadership, our environmental specialists, all employ ees, and our suppliers, partners, and other stakeholders. We hope that communicating our commitment, challenges, and progress unleashes the creativity and innovation of everyone touched by Alaska Airlines and Horizon Air. We are proud of what we have accomplished, but fully acknowledge that we are at the beginning of a journey. Please join us! Alaska Air Group | 2009 Environment Report 39 INVITATION FOR FEEDBACK We greatly appreciate your comments and suggestions regarding this report. Please contact us at www.alaskaair.com/consumeraffairs This report has been produced as an electronic document as part of our commitment to environmental responsibility. If you choose to print out all or part of it, please recycle the printed pages when you are finished. Alaska Air Group | 2009 Environment Report 40 Carbon Emissions Overview (2010) In 2010, Alaska Airlines and its regional partner Horizon Air reported a 30% reduction in carbon emissions per revenue passenger mile (RPM) compared to 2004 levels. This improvement reflects ongoing efforts in aircraft modernization and operational efficiency, though the total CO₂e emissions figure for 2010 was not disclosed publicly. Source: Alaska Airlines Corporate Responsibility News Emissions Intensity and Efficiency Fleet Modernization: Alaska Airlines continued upgrading to more efficient aircraft like the Boeing 737 Next Generation and Bombardier Q400 for Horizon Air. These aircraft offer better fuel economy and lower emissions per seat mile. Operational Enhancements: In 2010, Alaska conducted a “Greener Skies” test flight using satellite-based Required Navigation Performance (RNP) technology, which optimized flight paths. The test flight achieved a 35% reduction in emissions compared to conventional procedures. Source: FlightSource.ca – Greener Skies Test Flight Flight Procedures and Innovation Alaska Airlines estimated that full adoption of RNP procedures at Seattle-Tacoma International Airport could save 2.1 million gallons of fuel annually and reduce carbon emissions by 22,000 metric tons per year. Source: FlightSource.ca – Greener Skies Ground Operations and Infrastructure Alaska Airlines expanded its use of electric ground support equipment (GSE) and reduced dependence on aircraft auxiliary power units (APUs) at gates by utilizing ground power and pre-conditioned air systems. These measures cut emissions during aircraft servicing and turnaround. Source: Alaska Airlines Sustainability Archive Would you like me to format this into a formal PDF or Word document for you to present to your client? Carbon Emissions Overview (2011) In 2011, Alaska Airlines and its regional partner Horizon Air achieved a 30% reduction in carbon emissions per revenue passenger mile (RPM) compared to 2004 levels. This milestone was accomplished through strategic investments in fuel-efficient aircraft and the implementation of advanced flight procedures. Emissions Intensity and Efficiency Fleet Modernization Alaska Airlines continued its transition to an all-Boeing 737 fleet, while Horizon Air operated exclusively with Bombardier Q400 turboprops. Both aircraft types are recognized for their superior fuel efficiency in their respective classes. (https://www.prnewswire.com/news-releases/alaska-air-group-issues-firstcomprehensive-corporate-sustainability-report-169441116.html?utm_source ) Operational Enhancements The airline expanded the use of Required Navigation Performance (RNP) procedures, enabling more direct and efficient flight paths. This advancement contributed significantly to fuel savings and emissions reductions. Flight Procedures and Innovation In November 2011, Alaska Airlines operated 75 commercial flights powered by a 20% biofuel blend, marking a significant step toward sustainable aviation fuel (SAF) adoption. These flights demonstrated the viability of alternative fuels in reducing greenhouse gas emissions. Ground Operations and Infrastructure Ground Power Utilization By 2011, 100% of Alaska Airlines' airport gates were equipped to provide ground power, allowing aircraft to shut down auxiliary power units (APUs) while parked. This initiative led to substantial reductions in fuel consumption and emissions during ground operations. Electric Ground Support Equipment (GSE) Alaska Airlines invested in electric GSE, further decreasing emissions associated with ground activities. Sustainability Highlights • Recycling Efforts: In 2011, Horizon Air achieved a 90% inflight recycling rate, while Alaska Airlines reached 49%. • Energy Efficiency: The airline implemented energy-saving measures across its facilities, contributing to overall emissions reductions. Alaska Air Group Sustainability Report 2012 Reporting period January 1, 2010, to December 31, 2011 WHO WE ARE Welcome Alaska Air Group is committed to leading our industry in environmental stewardship. We are dedicated to honorable and responsible relationships with our customers, employees, investors, business partners and the communities where we fly. This is Air Group’s first full Sustainability Report and expands on our first Environmental Report that we published in 2010. This Sustainability Report summarizes the significant effects of our environmental, economic and social goals, progress and impacts. Our intention is to transparently document our corporate social responsibility efforts and use this report as a platform for dialogue and collaboration to drive continued improvement and innovation. We report on the facilities that are maintained by Alaska Air Group. Although we do not document the environmental or social impacts of our suppliers, where relevant we describe collaborative improvement efforts and procurement restrictions. This report covers Air Group’s two carriers, Alaska Airlines and Horizon Air. We describe aggregated data for Air Group as well as separate data for the two airlines where the information is relevant and available. This report summarizes data from Jan. 1, 2010, to Dec. 31, 2011. Where available, we include data showing trends over multiple years. This report is consistent with Level B requirements of the internationally recognized Global Reporting Initiative. Although the report has not been externally assured, financial and governance data drawn from our 2011 Annual Report (as reported on Form 10k) were audited by KPMG. Our current plan is to publish a Sustainability Report every other year. We continue to build our infrastructure of key performance indicators, refine our measurement and reporting systems, and develop our processes for sustainability-related goal-setting and deployment. © 2012 by Alaska Air Group, Inc. All rights reserved. No part of this report may be reproduced without permission of Alaska Air Group, Inc. Contents 2 LEADERSHIP MESSAGE 46 OUR SUSTAINABILITY IMPACTS AND PERFORMANCE AT A GLANCE 13 WHO WE ARE 14 About Alaska Air Group 15 Key Facts and Figures 16 Corporate Governance 19 WHAT WE ARE COMMITTED TO 20 Engaging With Our Stakeholders 22 Our ‘Higher’ Purpose & Strategic Focus Areas 25 HOW WE REACH FOR ENVIRONMENTAL SUSTAINABILITY 26 Aiming at Environmental Sustainability 28 Reducing Our Carbon Footprint 36 Tackling Our Materials Waste & Recycling 40 Addressing Other Environmental Impacts 45 WAYS WE ADVANCE ECONOMIC SUSTAINABILITY 46 Creating Direct Value 48 Creating Indirect Economic Impact 51 HOW WE EMBRACE CORPORATE RESPONSIBILITY 52 Ensuring Safety & Satisfaction 58 Developing & Caring for People 60 Partnering with Labor 64 Contributing to the Community 71 LOOKING FORWARD 72 Alaska Air Group Values 74 Global Reporting Initiative Alignment / GRI Index 82 Invitation for Feedback LEADERSHIP MESSAGE A message from Brad Tilden PRESIDENT and Chief Executive Officer Alaska Air GROUP All of us at Alaska Air Group are very proud of the good value and service we provide to our passengers—a mission that’s especially crucial to people in the state of Alaska who live in isolated communities and rely on us as their lifeline to the outside world. But we also strive to do much more than that. Our goal is to be a good airline, a good business, a good employer and a good steward for the environment. We believe the only way to accomplish these objectives over the long term is to run our business successfully and produce profits that enable us to offer low fares to our customers, reinvest in our business, reduce our impact on the environment and be a great place for our people to work. Accomplishing all of this is difficult in our industry and during these times, but it is our objective and I’m pleased that we’re making headway in a number of areas. It’s also important to say we have much more to do. Air Group’s 2012 Sustainability Report covers our efforts in 2010 and 2011 and conforms to the Global Reporting Initiative, an international standard for triple bottom line reporting on performance, people and our planet. I’d like to touch on several of our efforts here. Everything we do begins with a fundamental premise that we’re committed to the highest ethical behavior and doing the right thing for all of our stakeholders. We operationalize this through Five Focus Areas, which our strategic plan is based upon. Safety and compliance is our top priority—and we will not compromise on this. From there, we believe in treating our people well so they’ll treat our passengers well. We’re a company of nearly 13,000 people strong, who earn almost $1 billion a year in wages and benefits to support their families, make house and car payments, and pay for schooling. Their outstanding efforts have also earned them $240 million in bonuses over the past three years (equal to a month’s extra pay for most employees in 2010 and nearly a month in 2011). During the same time, Air Group contributed $427 million to their pension plans. We also continue to adapt and innovate for our customers while offering them an ever-increasing roster of destinations. Hawai‘i, a market we serve from eight cities on the mainland, has grown to 20% of our network in less than five years. Additionally, our new flights to Kansas City, Philadelphia and Fort Lauderdale continue a transcontinental expansion we launched a decade ago. Satisfied customers lead to profitability and reasonable returns for our investors. In the past two years, we earned record adjusted profits and exceeded our industry-leading goal of a 10 percent return on invested capital over a business cycle. Even as we’ve grown, we’ve become more efficient. Our sister carrier Horizon Air completed its migration to a fleet of Bombardier Q400s in 2011. This project complemented Alaska’s upgrade to an all-Boeing 737 fleet. These best-in-class fuel-efficient aircraft not only save us millions of dollars a year, they’ve been a key factor in reducing our carbon emissions by 30 percent since 2004 (measured flying one passenger one mile). Air Group’s success is founded on the award-winning service, professionalism, pride and passion of our people. Caring is not just what our customers notice when they fly with us—it’s who A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 we are. We call this culture “Alaska Spirit” and “Horizon Heart,” and it permeates the relationship we have with our customers and communities in many ways. “Our goal is to be a good airline, a good business, a good employer and a good steward for the environment.” After our maintenance employees observed fallen soldiers being transported on their final journey home, for example, they developed a more respectful process—one that other airlines are now adopting. Off the job, our people volunteer thousands of hours of service to charities. Their efforts augmented $7.1 million in corporate giving last year to organizations such as the Make-A-Wish Foundation, which celebrated its 25th anniversary of partnership with Alaska in 2011. to create a viable biofuels industry. During the fourth quarter of 2011, Alaska and Horizon became the first domestic carriers to operate multiple biofuel-powered flights—we flew 75 flights from Seattle to Washington, D.C., and between Portland and Seattle—to further highlight aviation’s need for an affordable and sustainable supply of alternative fuel. We are striving to minimize our environmental impact in a variety of ways. One of these projects is called “Greener Skies Over Seattle.” Using a satellite-based system known as Required Navigation Performance, or RNP, we’re streamlining landing approaches to Seattle-Tacoma International Airport. The result is enhanced safety and reliability along with reduced carbon emissions through better airspace efficiency. Alaska pioneered RNP, which has been adopted at airports across the nation and represents a foundational piece of the FAA’s NextGen air traffic management system. The FAA forecasts that ongoing NextGen work will save 1.4 billion gallons of fuel through 2018, reducing carbon emissions by 14 million metric tons annually—or the equivalent of taking nearly 3 million cars off the road every year. To help support the aviation industry’s goal to end its growth in carbon emissions by 2020 and cut emissions in half by 2050, Air Group joined the first U.S. regional group of its kind to look at alternative aviation fuels. Sustainable Aviation Fuels Northwest concluded last year that the Pacific Northwest has the feedstocks, fuel-delivery infrastructure and political will needed We’ve also continued other efforts to conserve natural resources—from using sustainable inflight service items to recycling onboard waste to powering our aircraft on the ground with electricity and other sources that are more efficient than aviation fuel. Our inflight recycling programs set industry standards and have been part the culture at Horizon since the early 1980s. As much as we’ve accomplished, though, there is more to do to benefit our employees, customers, investors and the planet. I’m confident that the dedication, resourcefulness and determination of our people will lead to even greater success. As we embrace the skies ahead, our Five Focus Areas will guide us. Our priority, as always, is our unwavering focus on safety every day and on every flight. We’ll keep working together to provide our passengers with low fares and friendly, knowledgeable people they can depend on. In short, we’re determined to make Alaska and Horizon the easiest airlines to fly on by continuing to be more efficient and effective—both internally and in how we affect the world around us. WHO WE ARE BILL AYER Chairman of the Board Alaska Air Group “Our ‘Alaska Spirit’ drives everyone in the company to take great care of our customers and each other—as well as the world around us. Our goal of becoming the domestic airline leader in environmental stewardship is founded on operating the most fuelefficient aircraft in their class, a wide range of sustainability practices, and a history of innovation that also makes flying safer and more reliable.” GLENN JOHNSON President Horizon Air “Caring for the environment, our people and the communities we serve is not only the right thing to do—it makes good business sense too. That’s why I am so passionate about each of the elements of our Corporate Social Responsibility program, which ranges from environmental stewardship to corporate giving to our employee assistance programs. I’m very proud of the work our people have done, and of the energy our team puts into these important responsibilities day in and day out.” A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 PERFORMANCE HIGHLIGHTS 30% BIOFUEL Commercial biofuel flights completed in November 2011: 75 Reduction in carbon footprint intensity at Alaska Airlines since 2004; 27% reduction at Horizon Air since 2004. ZERO INCIDENTS OF NON-COMPLIANCE WITH ENVIRONMENTAL REGULATIONS 1 Alaska Airlines stations that use ground power for aircraft parked at gates instead of onboard auxiliary power unit: * occasional minor exceptions in Alaska reduction in facilities’ energy use / square foot since 2008 90% $1B $1.2B of Horizon Air inflight recyclables collected; 49% of recyclables captured at Alaska Airlines in 2011 Carried 700,000 visitors to Hawai‘i, contributing to nearly $1.2 billion in direct visitor expenditures in 2011, and adding 350 quality jobs to Hawai‘i’s work force $7.1M in cash and in-kind donations in 2011 (Data source: DOT Form 41 and 298C) 19% airport wind turbine-solar panel installation in Nome, Alaska per year spend with diversity-qualifying suppliers 1 # In fuel efficiency domestically per revenue ton mile and revenue passenger mile 100% st $100M in wages and benefits earned by Alaska Air Group employees in 2011 25M $287M Passengers in 2011 114M Pounds of cargo in 2011 2011 ADJUSTED NET INCOME IN A CHALLENGING BUSINESS ENVIRONMENT HIGHEST IN CUSTOMER SATISFACTION AMONG TRADITIONAL NETWORK CARRIERS IN NORTH AMERICA, 2008-2012 (J.D. Power & Associates) GOLD STANDARD AMERICAN HEART ASSOCIATION’S FIT FRIENDLY AWARD 16 COMMUNITIES SERVED IN THE STATE OF ALASKA THAT HAVE NO ROAD ACCESS. 1 # On-Time Performance operational excellence award to Alaska Airlines in 2010 and 2011 (Data source: FlightStats.com) O U R S U S TA I N A B I L I T Y P E R F O R M A N C E AT A G L A N C E Our sustainability impacts and performance at a glance. ENVIRONMENTAL SUSTAINABILITY: Reduce Emissions from Fossil Fuel Consumption SUPPORTING GOAL / PROJECT PROGRESS 2012 AND BEYOND Contribute to an industry-wide goal of reducing CO2 emissions by 50% by 2050, relative to 2005 levels. [Alaska Airlines / Horizon Air] Alaska Airlines achieved a 7.8% reduction in CO2 emissions per revenue passenger mile (RPM) since 2009. Horizon Air achieved a 13.4% reduction per RPM during the same period. Air Group’s carbon footprint intensity has decreased nearly 30% since 2004. Page 28. Continue to improve emissions reductions through fleet renewals, weight reduction efforts and innovative flying efficiencies. Alaska and Horizon helped form the group Sustainable Aviation Fuels Northwest, which published a report in May 2011 that found the region has the feedstocks, delivery infrastructure and political will to create a biofuels industry. In November 2011, Alaska Airlines and Horizon Air launched 75 commercial flights powered by biofuel. Pages 32-33. Air Group will continue to actively pursue opportunities to purchase sustainable aviation biofuels where it is economically sustainable. We will evaluate factors such as supply, distribution infrastructure, price and sustainability. Preferably, the supply would come from a Pacific Northwest, Los Angeles-area or Hawai‘i location. 65% of Horizon Air’s vehicle fleet consists of electric vehicles. 10% of Alaska Airlines’ vehicle fleet is electric (unchanged since 2009). Page 33. Evaluate fleet efficiency opportunities in 2012. l ON TRACK Promote the development and adoption of sustainable and affordable aviation fuels. [Alaska Airlines / Horizon Air] l ON TRACK Address vehicle fleet emissions. l NEEDS IMPROVEMENT (Alaska Airlines) Increase percentage of electric motorized equipment to 20% by the end of 2013. [Alaska Airlines]. Establish baseline GSE fuel use in 2013 by implementing a system to accurately track all types of GSE fuel consumption. [Alaska / Horizon] l ON TRACK (Horizon Air) ENVIRONMENTAL SUSTAINABILITY: Reduce Emissions from Heating and Electricity Usage in Buildings Reduce facilities energy consumption 30% by 2020, relative to 2008 levels (measured by Btu per square foot in buildings maintained by Air Group). [Alaska Airlines / Horizon Air] l IN PROGRESS Horizon Air decreased energy consumption per square foot of building space 30% over the past two years. Alaska Airlines decreased consumption 2.8% since 2009, though it increased 1.7% in 2010. Air Group achieved a combined 19% reduction in facilities energy since 2008. Pages 34-35. More efficient heating and cooling system installed at Alaska Corporate Headquarters. Page 34. Completion of first wind/solar installation in Nome, Alaska, is expected to produce 15,000 kilowatt hours of power annually. Page 35. Obtain LEED certification for Board Room at Los Angeles International Airport in 2012. [Alaska Airlines]. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 This Progress on Performance chart reflects Air Group’s material sustainability impacts, risks and opportunities. It includes our performance through Dec. 31, 2011, outlines our goals and, where relevant, summarizes our progress against goals. ENVIRONMENTAL SUSTAINABILITY: Recycle Our Waste SUPPORTING GOAL / PROJECT PROGRESS 2012 AND BEYOND Increase the rate of recycled inflight waste with a target of 100% by year-end 2010. The focus is on collecting recyclable materials inflight and recycling these materials on the ground. [Alaska Airlines] Original 2009 goal of 100% diversion of inflight recyclables (paper, plastic, glass and aluminum) was not met, and the goal was reduced to 65% in 2011. As of 2011, Alaska Airlines collected 49% of all recyclable inflight materials, and 95% of all catering locations accepted these materials for recycling. Pages 36-37. Modified Goal: Collect and divert 70% of all inflight recyclable materials by year-end 2012, and increase collection rate to 90% by year-end 2015 [Alaska]. Horizon Air’s flight attendants collected 90% of all inflight recyclables in 2011. This is an increase of 7% since our last reporting period in 2009. All goals except for aluminum were met or exceeded. Collect and divert more inflight recyclables by increasing our diversion rate by waste stream type: aluminum 85%; paper 80%; glass 100%; plastic 75%. l NEEDS IMPROVEMENT Increase inflight recycling rate by specific type: l ON TRACK 100% of non-airport company-owned facilities where Alaska and Horizon control the disposal have recycling programs by 2020. [Alaska Airlines / Horizon Air] l NEW Expand catering location recycling efforts to 100% of all catering locations by 2Q 2012. 2011 Results: aluminum 78%; paper 77%; plastic 71%; glass 100%. Pages 36-37. New goal. Establish a standardized recycling program for the five largest company-owned non-airport facilities in Seattle by year-end 2012. O U R S U S TA I N A B I L I T Y P E R F O R M A N C E AT A G L A N C E Our sustainability impacts and performance at a glance. ENVIRONMENTAL SUSTAINABILITY: Reduce Consumption of Non-Sustainable Resources Decrease paper use 25% by weight by 2020, relative to 2012 baseline. [Alaska Airlines / Horizon Air] New goal. Identify largest-volume office paper consumption and establish a baseline. In 2010, we eliminated our main cabin plastic cutlery in favor of plant-based compostable utensils. In 2011, we replaced our main cabin polystyrene coffee cup with recyclable paper cups on all Alaska and Horizon flights. Page 36. Initiate a replacement plan for remaining materials. l NEW Identify inflight serviceware products that can be replaced with organic, sustainable, recyclable or compostable alternatives. [Alaska / Horizon] l ON TRACK Replace existing juice box with one made from FSCcertified materials. ECONOMIC SUSTAINABILITY: Focus on Low Costs and Low Fares SUPPORTING GOAL / PROJECT PROGRESS 2012 AND BEYOND Reduce costs per available seat mile (CASM)—the cost to fly each aircraft seat one mile —excluding fuel to 7.5 cents at Alaska and 12 cents at Horizon. Neither Alaska nor Horizon met the plan goal for 2011. Both airlines continue to work on lowering costs in a variety of ways, such as investing in larger aircraft, driving more direct sales to alaskaair. com and improving productivity through more efficient processes. Continue to reduce CASM at Alaska and Horizon to remain competitive with lower-cost airlines for the long-term. l NEEDS IMPROVEMENT A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 This Progress on Performance chart reflects Air Group’s material sustainability impacts, risks and opportunities. It includes our performance through Dec. 31, 2011, outlines our goals and, where relevant, summarizes our progress against goals. ECONOMIC SUSTAINABILITY: Optimize Profit and Value Created SUPPORTING GOAL / PROJECT PROGRESS 2012 AND BEYOND Grow Air Group capacity (measured by available seat miles) 4% to 8% annually, assuming acceptable profitability. Air Group met its goal by increasing capacity 4.7% in 2010 and 6.8% in 2011. The company ordered 15 new aircraft and accepted delivery of three 737-800s in 2011. Alaska and Horizon added service to 25 new markets during the past three years. Page 47. Establish Alaska Air Group as the preferred carrier for travelers living on the West Coast. Air Group exceeded its goal by earning a 10.7% return on invested capital in 2010 and 11.7% in 2011. Page 47. Continue to keep 10 cents on every dollar we collect (before taxes) by responding nimbly to changing market conditions and continuing to lower costs. Air Group spent $109 million last year with diverse Develop performance standards for our integrated buyers that ensure a minimum of one diverse supplier is included in all RFPs issued by Supply Chain Managment. If no qualified diverse supplier can be found, buyers will document steps taken to try and identify diverse suppliers. l ON TRACK Earn a 10% return on invested capital over a business cycle in order to continue offering low fares while making reasonable profits that sustain competitive wages and benefits and company and job growth. Accept delivery of three 737-800s and four 737900ERs in 2012 and up to nine more in 2013. l ON TRACK Target an average of 3% annual growth in the total number of diverse suppliers utilized within our supply chain. [Alaska Airlines / Horizon Air] l NEW suppliers. The first- or second-largest cost for airlines is fuel. With few “diverse” suppliers (small, minority-owned, and/or women-owned businesses) in this area, it can be challenging to spend significantly in this category. We are developing better practices for tracking diverse spend across the company. Page 48. 10 O U R S U S TA I N A B I L I T Y P E R F O R M A N C E AT A G L A N C E Our sustainability impacts and performance at a glance. SOCIAL & COMMUNITY SUSTAINABILITY: Be the Industry Leader in Safety & Compliance SUPPORTING GOAL / PROJECT PROGRESS 2012 AND BEYOND Implement an integrated Safety Management System (SMS) for Alaska Airlines and Horizon Air and reduce Risk Level 3+ events, which represent elevated risk to the operation, such as significant aircraft/ asset damage, injuries to employees and customers or a significant reduction in safety). Air Group is moving to SMS to build upon the many systems already in place to provide better and more efficient oversight that is integrated across all aspects of the organization and to ensure safety risks are managed to acceptable levels. Alaska is at the second of four levels of implementation; Horizon is at the first level. Page 52. Full implementation of SMS framework to establish interim target of reducing risk and be completed by year-end 2015 and reduce Risk Level 3+ events to 5.5 events per 10,000 departures(on our way toward Zero events). Alaska Airlines’ lost-time injury rate increased about 4% to 5.19 injuries per 100 full-time employees from 2010 to 2011. The increase was due to injuries reported by several specific work groups. Reduce lost-time injuries by 5% over baseline to 4.66 per 100 employees. [Alaska Airlines] Horizon’s lost-time injury rate decreased in the past two years from 2.95 to 2.26 (surpassing the 2010 and 2011 goals of 3.7 and 3.0, respectively). The decreasing rates are attributed to an increased emphasis on reporting hazards and ensuring those hazards are eliminated or minimized. Page 54-5. Reduce lost-time injuries to 2.82 per 100 employees. [Horizon Air] Some 3,400 Air Group employees completed awareness training in 2011 and certified their commitment to follow the code. Continue to deliver awareness training to all employees to achieve 100% awareness of the code of ethics. Actively engage stakeholder groups in ethical decision-making. l IN PROGRESS Reduce employee injuries. l NEEDS IMPROVEMENT (Alaska Airlines) l ON TRACK (Horizon Air) Foster an active reporting culture and dedication to ethical behavior by increasing awareness of and compliance with our code of conduct and ethics. l NEW SOCIAL & COMMUNITY SUSTAINABILITY: Enhance Customer Experience and Satisfaction Continuous improvement in customer satisfaction scores. l ON TRACK Alaska Airlines met the 2010 goal of 75% in every month and the 2011 goal of 77% for 11 months. Horizon met the 2010 goal of 78-80% (depending on the season) for nine months and the 2011 goal of 81% for 11 months. Pages 56-57. Establish a “Hassle-Free Customer Experience” metric, assess our baseline performance, and establish future improvement goals and initiatives. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 11 This Progress on Performance chart reflects Air Group’s material sustainability impacts, risks and opportunities. It includes our performance through Dec. 31, 2011, outlines our goals and, where relevant, summarizes our progress against goals. SOCIAL & COMMUNITY SUSTAINABILITY: Develop, Engage and Care for People SUPPORTING GOAL / PROJECT PROGRESS 2012 AND BEYOND Close our defined-benefit pension funds, honor our pension obligations and ensure generous defined contribution retirement plans for employees. Alaska Airlines added nearly $280 million to its defined-benefit pension plans in 2010 and 2011. The funded status was 81% at the end of 2011. The company announced it will freeze the pension plan covering 735 management and dispatch employees at the end of 2013 and replace it with a generous defined contribution plan. Page 46. Continue to fund the defined-benefit program and offer generous market-based defined contribution retirement plans for employees. In 2011, 1,260 Alaska Airlines employees completed the seminar. Page 59. Horizon Air employees will commence Flight Path in 2012, with the goal of all 13,000 Air Group employees completing the seminar by the end of 2013. Employee engagement increased slightly at Alaska Airlines over the previous survey taken in 2009. Engagement decreased 16% at Horizon Air, which is attributed to major changes involving the carrier’s transformation plan. However, in an interim survey taken in April 2012 engagement exceeded pre-transformation scores. Page 58. Achieve a rating in the 90th percentile or a rate of 4.09 on the Kenexa Employee Engagement Index by the end of 2017. Strong partnerships established with our Employee Resource Groups and Inclusion Advisory Council to identify potential barriers. Page 62-63. Improve how we measure factors relevant to increasing applicant pool diversity to ensure our diversity outreach efforts are effective. Create formal expectations around coaching, mentoring and sponsoring employees. Air Group contributed $7.12 million in cash and inkind donations to environmental, social / community services, medical (emergency / research), educational, sports and arts organizations in 2011. This represented an increase from $5.64 million in 2010. Pages 66-67. Focus our corporate giving on medical / social and youth / educational issues. Implement an employee giving and volunteerism portal with a participation goal to be defined. l ON TRACK Maintain a “small company feel” by connecting employees through an eight-hour Flight Path seminar. [Alaska Airlines / Horizon Air] l IN PROGRESS Increase employee engagement and satisfaction for Air Group as a whole. l NEEDS IMPROVEMENT Increase the diversity of our leadership teams. [Alaska Airlines / Horizon Air] l NEEDS IMPROVEMENT Continue to encourage philanthropy through our company and our individual employees. [Alaska Airlines / Horizon Air] l ON TRACK Who we are: We are committed. We are engaged. We are passionate. We are Alaska Air Group. Alaska Airlines and Horizon Air realized long ago that our business is about people more than planes. Our core values of Alaska Spirit and Horizon Heart embody this knowledge. These values encompass our commitment to our customers, employees and investors. They also represent Alaska Air Group’s culture of continually embracing the challenges of an ever-changing world, including the need for ongoing sustainability improvements and innovation. IN THIS SECTION 14 About Alaska Air Group 15 Key Facts & Figures 16 Corporate Governance 14 WHO WE ARE About Alaska Air Group. Alaska Air Group is the holding company for two operating subsidiaries, Alaska Airlines and Horizon Air. The Seattlebased carriers provide passenger and cargo transportation to more than 90 destinations in the United States, Canada and Mexico. Air Group is a publicly held incorporated entity and its stock is traded on the NYSE. Alaska Airlines, the nation’s seventhlargest carrier, operates from hubs in Anchorage, Alaska; Los Angeles; Portland, Oregon; and Seattle. Alaska flies 117 Boeing 737s to 62 destinations. Horizon Air operates a fleet of 48 Bombardier Q400 turboprop aircraft to 39 destinations from Portland and Seattle. In 2011, Horizon changed its business model to become an all-capacity purchase agreement (CPA) carrier for Alaska. While Horizon remains a separate airline and subsidiary of Air Group, seats on the regional carrier’s aircraft are marketed and sold by Alaska Airlines. Alaska also determines where, when and how much Horizon flies, and buys all capacity produced under the CPA. Air Group has been integrating many previously separate systems as shared services to both airlines for several years, and the transition of Horizon Air’s external brand to Alaska Airlines was completed in mid-2012. Both airlines outsource heavy aircraft maintenance to U.S.-based vendors. Alaska also contracts out most of its ramp/ground operations and some customer service agents. We select our partner vendors based on several factors, including their safety record, safety programs, commitment to training, hiring criteria, diversity and commitment to process improvements. Recent significant changes in our business include additional service to 25 new markets in the past three years; a 28.3% increase in Air Group’s stock price from the end of 2010 to Dec. 31, 2011; and a 2-for-1 stock split in mid-March 2012 (our historical financial information has been adjusted accordingly). Beneficial ownership tables can be found in our 2011 proxy statement. As of Dec. 31, 2011, our largest shareholders and their ownership percentages were: BlackRock Institutional Trust..........7.77% Primecap Management Co. ............7.43% PAR Capital Management...............5.61% Vanguard Group..............................5.49% Renaissance Technologies Corp. ....5.35% Recognition Air Group’s commitment to safety, customer service, innovation and industry leadership was recognized by several awards during the past two years. Among them: “FAA Diamond Award” for maintenance training excellence in 2010 and 2011 (Alaska and Horizon individually). “Highest in customer satisfaction among traditional network carriers” in the J.D. Power North America Airline Study in 2010 and 2011 (as well as 2008, 2009 and 2012). “World’s top-performing airline” by Aviation Week magazine in 2010. “On-Time Performance Award” (Alaska) by FlightStats.com in 2010 and 2011. “Airline Technology Leadership Award” by Air Transport World magazine in 2011. “Business Generator Recycler of the Year” (Horizon) by the Washington State Recycling Association in 2010. Joseph S. Murphy Industry Service Award for outstanding public and community service by Air Transport World magazine, announced in January 2012. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 YEAR ENDING 2011 12,806 30 Billion 114 Million Total employees Seat miles Cargo pounds (freight & mail) $287.4M 25 Million $108M Adjusted net income Passengers Cargo revenue $5.2B Total assets Barrow Prudhoe Bay Kotzebue Fairbanks Nome Anchorage Cordova Bethel Dillingham King Salmon Kodiak Yakutat Glacier Bay / Gustavus Sitka Adak Dutch Harbor Juneau Petersburg Wrangell Ketchikan Edmonton Calgary Vancouver Kelowna Bellingham Spokane Kalispell Great Falls Wenatchee Missoula Yakima Pullman Helena Lewiston Pasco Walla Walla Billings Portland Bozeman Victoria Seattle Eugene Medford Redmond/ Bend Minneapolis/St. Paul Sun Valley Boise Boston Chicago (O'Hare) New York City / Newark Denver Santa Rosa San Francisco San Jose Monterey Philadelphia Reno/Lake Tahoe Sacramento Oakland Kansas City City - NationalNational) Washington, D.C. (Reagan St. Louis Mammoth/Yosemite Fresno Las Vegas Burbank Santa Barbara Ontario Los Angeles Palm Springs Long Beach Orange County Phoenix San Diego Tucson Atlanta Dallas / Fort Worth Lihu’e (Kauai) Austin Honolulu (Oahu) Kona (Hawaii) Houston Orlando Kahului (Maui) Fort Lauderdale Miami Loreto La Paz Los Cabos Mazatlan Guadalajara Puerto Vallarta Manzanillo Mexico City Ixtapa / Zihuatanejo Alaska Airlines and Horizon Air together serve more than 90 destinations in the United States, Canada and Mexico. 15 16 WHO WE ARE Ensuring ethics: governance and compliance. Corporate Governance We have a commitment to our employees, customers and investors to behave ethically and in compliance with the law. Our commitment guides the decisions and actions we make every day as well as our approach to corporate governance. CODE OF CONDUCT & ETHICS The Alaska Air Group Board of Directors, the highest governance body of the company, monitors our commitment through their oversight of the company’s governance and ethics practices. Management regularly reviews aspects of its results with the full board and its committees. Board committees include: All new employees receive training on the code and certify their commitment to follow it. In 2011, the board of directors and all active management and wagescale employees (about 3,400 people) at both airlines completed the course. In 2012, all union employees will also be required to take the course or review the code. • The Safety Committee (Air Group is one of only a few airlines to have a board committee focused exclusively on safety) assists the board in discharging its responsibilities regarding our No. 1 priority. The board established this committee in 2001 to assure the company’s stakeholders that airline safety is its highest priority and the responsibility of every employee, and that Air Group strives to be unsurpassed in airline safety and compliance. Alaska Air Group maintains a Code of Conduct & Ethics that all employees, officers and directors of Air Group, Alaska Airlines and Horizon Air must read and understand. The code outlines responsibilities for everyone to observe the highest standards of business and personal ethics while promoting the best interests of the company. In addition, Air Group maintains an active reporting culture and encourages employees, vendors, customers and other interested parties to call the ethics hotline or submit a safety hazard or other internal mechanism to report incidences of non-compliance with laws and regulations. All reports are thoroughly investigated and results are reported quarterly to the Board of Directors Safety and Audit Committees. To read Air Group’s Code of Conduct & Ethics or for more information about our corporate governance, visit www.alaskaair.com/investors and click on “Corporate Governance.” • The Audit Committee assists the board in ensuring: 1) the integrity and reliability of Air Group’s financial statements; 2) compliance with all relevant legal and regulatory requirements; 3) the independence and qualifications of our independent accountants; and 4) the adequacy of internal controls and financial risk management. • The Governance and Nominating Committee assists the board in identifying and nominating individuals to A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 17 Alaska Air Group Board of Directors Demographics Director Demographics (AAG, AS, QX) Number of Directors Directors on Board: 10 (100%) Independent Directors on Board: 8 (80%) Males: 7 (70%) Females: 3 (30%) Minorities: 3 (30%) *These numbers represent each of the boards—Alaska Air Group, Alaska Airlines and Horizon Air. serve on the board and its committees and develops and recommends corporate governance principles applicable to the company. • The Compensation and Leadership Development Committee discharges the board’s responsibilities regarding compensation of elected officers of Air Group and its subsidiaries, and annually discloses the company’s pay practices of its five most senior management in compliance with applicable rules and regulations. The Alaska Air Group Board of Directors participates in an annual officer and director questionnaire in which members provide information on themselves and rate each of the committees and the performance of the board as a whole. During this reporting period, the chair of the board, Bill Ayer, also served as chief executive officer of Alaska Air Group, Alaska Airlines and Horizon Air. In mid-May 2012, Alaska Airlines President Brad Tilden assumed the role of CEO for Air Group and its two subsidiary airlines. Committee Demographics Audit Comp & Leadership Development Gov/Nom Safety # of Directors 3 (30%) 3 (30%) 4 (40%) 4 (40%) # of Males 1 (10%) 3 (30%) 3 (30%) 3 (30%) # of Females 2 (20%) 0 (0%) 1 (10%) 1 (30%) # of Minorities 0 (0%) 0 (0%) 3 (30%) 2 (20%) Age 50-54 0 (0%) 0 (0%) 0 (0%) 0 (0%) Age 55-59 1 (10%) 0 (0%) 0 (0%) 0 (0%) Age 60-64 2 (20%) 1 (10%) 2 (20%) 3 (30%) Age 65-69 0 (0%) 1 (10%) 1 (10%) 0 (0%) AAG Board Leadership Roles Independent/ Executive Male/Female Age Range Minority (Y/N) AAG Board Chair Executive Male 55-59 N AAG Lead Director Independent Female 60-64 Y Audit Committee Chair Independent Female 55-59 N Comp & Leadership Development Chair Independent Male 60-64 N Gov/Nom Committee Chair Independent Female 60-64 Y Safety Committee Chair Independent Female 60-64 N Company shareholders, including employee shareholders, can provide recommendations or directions to the highest governance body by submitting a proposal for inclusion in the proxy statement in accordance with the company’s bylaws. Information about director compensation, nominating policies and other board-related issues appear in Alaska Air Group’s 2011 Annual Report and 2012 Proxy Statement available online at www. alaskaair.com/investors. What we are committed to: Safety and compliance. People focus. Hassle-free customer experience. Energetic and compelling brand. Low fares, low costs and network growth. Safety and compliance are the foundation of all that we do at Alaska Air Group. We possess an unwavering commitment to the safety of our passengers and employees, and to conduct our business with honesty, integrity and professionalism. We also strive to provide consistently high value to our customers at affordable prices and with unforgettable customer service. IN THIS SECTION 20 Engaging With Our Stakeholders 22 Our ‘Higher’ Purpose & Strategic Focus Areas 20 W H AT W E A R E C O M M I T T E D T O Engaging with our stakeholders. Air Group’s stakeholders include business and leisure travelers, corporate customers, employees, shareholders, the communities where we do business, our suppliers and partners, and airports. We determine material issues to report on in a variety of ways, including customer satisfaction and employee surveys, frequent flier and industry forums, Employee Resource Groups, our Corporate Travel Advisory Board and Community Advisory Boards, internal staff experts, and communication with other stakeholders (as outlined in the table to the right). The issues and indicators in this report, especially those summarized on pages 6 through 11, are those we identified as most important to our stakeholders. We are developing methods for conducting materiality analysis and engaging stakeholders to more rigorously identify and prioritize material issues, gather feedback on our progress, and talk about issues and opportunities. Our goal is to ensure that stakeholder priorities inform our key performance indicators, data collection, reporting and improvement efforts. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 CONSUMERS (THE FLYING PUBLIC) 21 Alaska Airlines hosts several consumer advisory boards and functions: 1) Frequent Flier “MVP Gold” Advisory Board: •12-14 Alaska Airlines’ frequent fliers (outspoken loyalists) are invited to Seattle quarterly to share their insights about new policies, programs, services, issues and new concepts. • Individuals formally participate on the board for two years, however, they informally keep in touch with the leadership team after their term. 2) Frequent Flier “MVP Gold” luncheons Alaska Airlines hosts 8-10 luncheons annually at locations throughout our route system as a gesture of thanks and to hear feedback from some of our very best customers. • Leaders and frontline employees from many major work areas share lunch topics with customers and actively respond to questions. • Top themes, suggestions and issues are documented and shared with the Alaska Airlines and Horizon Air leadership teams. CORPORATE CUSTOMERS Air Group obtains input from corporate customers primarily through our Corporate Travel Advisory Board. In addition to a range of other topics, conversations include CSRrelated issues such as carbon credits, reporting, our Greener Skies initiative, etc. EMPLOYEES Employee feedback is solicited and constantly utilized through direct interaction between supervisors, officers and union leaders; employee surveys; popular Q&A forums on our employee websites; and via our many Employee Resource Groups. COMMUNITIES We monitor concerns and impacts in the communities where we conduct business through our employees, Sales and Marketing staff, Employee Resource Groups, industry forums, public agencies, and other organizations. We also engage with best practice organizations around diverse topics such as disability outreach and community educational concerns. Our Community Advisory Boards, which consist of regional groups of local leaders in the state of Alaska, help Air Group stay in touch with issues facing those unique communities. We also collaborate with advocacy groups, such as those for the disabled, with input and recommendations from a Disability Advisory Board. AIRPORTS Air Group actively partners with airport authorities in each of our destinations to ensure a safe, compliant and positive travel experience for our customers. INVESTORS We routinely engage with investors through announcements of our financial results, Air Group’s annual shareholder meeting, industry conferences and face-to-face meetings. 22 W H AT W E A R E C O M M I T T E D T O Our ‘higher’ purpose and strategic focus areas. With roots in our namesake state, Alaska Airlines has always served as a lifeline for many communities we serve by providing transportation, medicine, mail and other supplies to locations accessible only by air and sea or with limited road access. Horizon Air shares its sister carrier’s passion for providing great service and being a good neighbor in the community. Looking ahead, Air Group’s road map for 2012 and beyond is founded on five focus 1 2 areas. Continuously improving our environmental and social sustainability performance is core to achieving these strategic objectives. Our social sustainability initiatives represent proactive steps we’re taking to achieve “Safety and Compliance” and “People Focus”—from ensuring the safety of customers and employees to developing and engaging our people. We also see social sustainability as a key factor in customer loyalty, which involves our “Hassle-Free Customer Experience” focus area. Sustainability—both environmental stewardship and social responsibility—is an increasingly important element of our “Energetic and Compelling Brand.” Finally, our relentless pursuit of fuel efficiency not only lowers our carbon footprint, it allows us to offer our customers lower fares. SAFETY AND COMPLIANCE Safety and compliance are the foundation of everything we do. We have an unwavering commitment to safety and compliance, and we will not compromise this commitment in the pursuit of other initiatives. PEOPLE FOCUS While airplanes and technology enable us to do what we do, we recognize that this is fundamentally a people business, and our future depends on how we work together to win in this extremely competitive environment. As we grow, we want to strengthen our small company feel while also providing people of all backgrounds equal access to opportunities based on individual abilities and performance. We will succeed where others fail because of our pride and passion, and because of the way we treat our customers, our suppliers and partners, and each other. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 3 4 5 23 HASSLE-FREE CUSTOMER EXPERIENCE We cultivate loyal customer relationships by offering an intuitive and trouble-free experience at all touch-points that is enabled by industry-leading technology, and by reliable and best-in-class customer service. ENERGETIC AND COMPELLING BRAND We will create a deeper emotional connection between our brand, our people, our customers and our communities. We will position our brand as friendly, genuine, and relevant to a changing customer profile, and we will use our brand and our technology to develop a more direct relationship with our customers. We will be the industry leader in environmental stewardship. LOW FARES, LOW COSTS AND NETWORK GROWTH We will become known for our low fares and high value in order to broaden our appeal, reduce our vulnerability to low-cost carriers, and fuel growth. We will fund low fares by relentlessly pursuing simplicity, low overhead and high productivity. We will establish ourselves as the preferred airline for all travelers living on the West Coast by defending and growing Alaska and the Pacific Northwest, and by growing Hawaii and California. We are targeting 4% to 8% annual growth for the Alaska mainline operation, assuming acceptable profitability. How we reach for environmental sustainability: Reduce our carbon footprint. Minimize resource use. Eliminate waste. Develop technology innovations. We recognize that our business promise—to fly our passengers to their destinations safely, on time and with their bags while providing great customer service—requires large quantities of jet fuel. Even though Air Group flies only 3% of domestic airline capacity, we burn more than 1 million gallons of jet fuel a day. That is why we continuously seek ways to reduce our reliance on fossil fuels and make meaningful changes to minimize our impacts on the planet. Environmental sustainability efforts are key to reducing our waste and energy costs, driving innovation, providing good value to our customers and benefiting our bottom line. These efforts are also simply the right thing to do. IN THIS SECTION 26 Aiming at Environmental Sustainability 28 Reducing Our Carbon Footprint 36 Tackling Our Materials Waste & Recycling 40 Addressing Other Environmental Impacts 26 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Aiming at environmental sustainability. Air Group’s Corporate Environmental Policy includes a clear statement of our intention and expectations regarding full compliance with all environmental laws and regulations, using energy and materials responsibly, replacing hazardous materials and products, and promoting a culture and competence to continually improve environmental stewardship. Our Corporate Environmental Policy is available at www.alaskaair.com; click “About Us” at the bottom of the page, then click “Social Responsibility.” CO 2e (Million METRIC TONS) We focus the bulk of our attention on minimizing the amount of fossil fuels we burn. We also work continually to minimize our environmental footprint in the areas of materials, waste, deicing fluids and noise pollution. Air Group’s carbon footprint intensity (emissions per revenue passenger mile)has decreased 30% since 2004. Our absolute total footprint has decreased 3%, even with increased flying during the past three years. 4.11 4.15 4.05 3.95 4.02 224.4 3.85 3.94 3.98 225 3.89 209.2 3.75 4.01 250 � TOTAL CO 2 e n GHG INTENSITY 201.5 3.63 195.5 200 3.75 175 186.5 3.65 174.6 3.55 3.45 2004 2005 2006 2007 2008 2009 150 164.3 2010 157.6 INTENSITY RATIO Alaska Air Group aims to be the domestic industry leader in environmental stewardship. Arguably, we have achieved this goal—at least as measured by fuel efficiency—even as we recognize that our industry is just scratching the surface of becoming truly sustainable. 0 2011 Total CO2e (carbon dioxide-equivalent) emissions and emissions per revenue passenger mile (RPM) In support of our Environmental Policy, Air Group has made a strategic commitment to measurably reduce our impact on the planet. The four core elements of our environmental strategy are: 1. Reducing emissions from fuel consumption; 2. Reducing emissions from heating and electricity consumption in our facilities; 3. Reducing consumption of non sustainable resources; and 4. Recycling our inflight and operational wastes. The following sections describe actions we are taking to operationalize this strategy, starting with how we’re working to reduce our carbon footprint. Aircraft Emissions About 99% of our carbon emissions come from burning aviation fuel—we use more than 1 million gallons each day. Fuel consumption is our biggest environmental and financial challenge. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 27 Leading the pack in fuel efficiency #1 Alaska Airlines ranks #1 among the 11 largest domestic carriers in fuel efficiency per revenue ton mile (RTM) and revenue passenger mile (RPM). (2011 Data source: DOT Form 41 and 298C) GRE E N H O U S E G A S I N V E N TO RY Alaska Air Group AIRCRAFT EMISSIONS We use third-party experts and standard methodology to assess our greenhouse gas emissions. Our carbon footprint is calculated annually by a third-party environmental consultant using standard greenhouse gas (GHG) Inventory protocol. Both direct emissions from the direct combustion of fossil fuels (Scope 1) and indirect emissions generated during the production of energy we consume (Scope 2) are inventoried to determine our carbon footprint. The inventory includes all major sources of emissions for which Alaska Air Group has operational control, including both of our wholly owned subsidiaries—Alaska Airlines and Horizon Air. Activity data from selected emission sources are compiled by Alaska Air Group personnel and evaluated by a consultant. A seven-year emissions inventory appears below. Air Group has been focused on reducing emissions for years and operates the most fuel-efficient airline fleets in the country. We continue to look for every opportunity, no matter how small, to further conserve fuel and reduce emissions. We increase the fuel efficiency of our aircraft the same way you might with your personal car: buying the most efficient model, removing unneeded weight, travelling the most direct routes available, limiting idling time, traveling at optimal speeds and maintaining engines to ensure optimal performance. Recordbreaking year-over-year load factors (percentage of seats filled) from 2008 to 2011 have also helped improve our efficiency as we are flying more passengers with nearly the same amount of fuel. Sulfur Dioxide Nitrogen Dioxide 2004 1,612,908 14,329,911 2005 1,581,065 14,202,478 20061,610,60314,735,548 20071,651,868 15,386,684 20081,598,03115,043,649 20091,455,57614,047,663 20101,504,74814,673,781 20111,564,94714,825,012 This table summarizes Air Group’s total sulfur and nitrogen oxides emissions (measured by kilograms per year). Fuel conservation programs keep the total amount of these pollutants at a steady level, even though our business continues to expand. 28 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Driving down costs and emissions through what we fly. Alaska Airlines has decreased the intensity of our carbon emissions (per revenue passenger mile) by 7.8% since our last reporting year in 2009 and 29.8% since our baseline year of 2004. At the same time, Air Group’s total carbon emissions have decreased by 3.2% in the past eight years, even though our business has increased by over 27%. Alaska is currently the most-efficient domestic carrier in the United States in terms of fuel per revenue passenger mile. We’ve taken an early lead on the majority of our competitors, but maintaining this position and additional efficiency improvements will only be more difficult. Horizon Air has also steadily reduced the intensity of its carbon emissions, posting a remarkable 13.4% reduction in CO2 intensity since 2009 and a 27% decline since 2004. (See table on previous page for Air Group figures.) Alaska Air Group FLEET COMPOSITION Carrier Fleet Composition Average Fleet Age (Years) Alaska Airlines (12) Boeing 737-900 Jet 8.8 (58) Boeing 737-800 Jet (17) Boeing 737-700 Jet (30) Boeing 737-400 Jet 117 Aircraft Total Horizon Air (48) Bombardier Q400 Turboprop Our strategies for driving fuel efficiency improvements fall into three categories: Alaska and Horizon currently operate two of the most fuel-efficient fleets in the nation as a result of aircraft replacements over the past several years. Aircraft environmental performance is further enhanced through aerodynamic improvements such as winglets and weight-reduction efforts. Alaska Airlines operates a 100% Boeing 737 fleet, having completed a transition from the less-efficient MD-80 in August 6.6 2008. Installing winglets on all appropriate aircraft has further increased their efficiency 3% to 5%. Alaska will continue to maintain these fleet efficiencies as we add more 737800s and -900ERs and retire older, less fuel-efficient 737-400s over the next five years. We plan to take delivery of 13 aircraft and retire three 737-400s by 2014 for a net increase of 10 jets. All new AAG aircraft will be equipped with winglets. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 Horizon Air completed its fleet transition to an all-Bombardier Q-400 turboprop fleet from a mix of Q400s, Q200s and 13 CRJ-700s in 2011. The Q400 burns 30% to 40% less fuel and produces equivalently lower emissions than comparable jets. The fleet transition is anticipated to save more than 1.3 million gallons of fuel per year. Overall, the substantial capital investment by Alaska and Horizon in new aircraft has lowered fuel bills and emissions and eliminated the costs associated with a mixed fleet’s complexity. 29 Alaska Airlines has recently made improvements to our aircraft interiors to reduce fuel burn and lessen environmental impacts. Beginning in 2012: New 737-800 deliveries include lighter-weight carpets (existing carpeting will be replaced by attrition); We will initiate an aircraft carpet recycling program—recycling the fibers into plastic bottles; Our 737-900ERs will have a light-weight seat design with featherweight leather; All new deliveries will have efficient mercury-free LED cabin lighting rather than flourescent lighting. Fuel efficiencies can also be achieved by reducing unneeded weight. Weightreduction considerations have been integrated into all business decisions involving our aircraft. Details about these projects appear in the next section. Providing heating and cooling to our aircraft parked at the gates is now achieved with ground power rather than the aircraft’s auxiliary power unit. This saves an estimated 2.7 million gallons of fuel per year. Photo: Don Wilson, Port of Seattle. 30 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Leading breakthroughs in the way we fly. Maximizing flying efficiency is a second key strategy for reducing fuel consumption and associated emissions. Implementing and testing alternative approach routes, improving ground procedures and detailed testing of new products for more efficient flight operations are all examples of how we continuously improve the way we fly. The main fuel conservation projects that have been introduced or expanded since our last reporting year (2009) include: Greener Skies: This project represents a partnership between Alaska and Horizon, the Federal Aviation Administration (FAA), Port of Seattle, and Boeing. Together, we’re working to implement quieter, more fuel-efficient arrival routes into Seattle-Tacoma International Airport. The routes use satellite-based technology, namely Required Navigation Performance (RNP) and Optimized Profile Descent—two key pieces of the FAA’s “NextGen” air traffic management system. Alaska Airlines and Horizon Air hope to receive FAA approval to start flying these arrivals regularly in 2013. The Greener Skies project is expected to save RNPequipped airlines more than 2 million gallons of fuel annually, which translates into savings of 22,400 metric tons of CO2. Noise exposure for about 750,000 people in the Puget Sound region will also be reduced. The project serves as a template for implementing NextGen across the nation. Ground Power at Gates: This project uses ground power, rather than the auxiliary power unit (APU) on the aircraft, to provide heating, cooling and electricity while airplanes are parked at the gates. Ground power burns 10 times less fuel than an APU. Currently, our APU reduction procedures are in effect at 100% of Alaska Airlines’ stations most of the year, with the exception of about a dozen rural stations in the state of Alaska. These stations do not provide ground power or air conditioning during the winter because it’s too difficult to operate and hook up the extra equipment in extreme weather. We have expanded this program in the past two years to all Alaska Airlines’ stations. Since 2009, this project has contributed an estimated net fuel savings of about 3 million gallons per year. Improved Flight Planning: Phased implementation of this project began in 2009. The goal is to provide closer prediction of actual fuel required and boarded on each flight. Improved fuel planning can mean less fuel burned and emissions produced by carrying less additional fuel. Since 2009, we estimate these efforts have contributed an average fuel savings of 310,000 gallons per year. Additional projects scheduled for implementation in 2012 include: Optimized Profile Descent (OPD): Also known as continuous descent approach, OPD is a navigation procedure in which aircraft maintain a continuous descent angle while approaching an airport. This method reduces fuel consumption, emissions and noise over the traditional step-down approach. Alaska Airlines is assisting the FAA in developing OPD procedures throughout our system. We currently use OPD in Anchorage and are planning to expand the procedure to five more airports in the coming year. Wide Area Augmentation System: WAAS builds on Horizon’s previous advances in-flight management system technology —made in conjunction with Alaska Airlines—such as Required Navigational A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 TRADITIONAL STEP-DOWN APPROACH OPTIMIZED PROFILE DESCENT Low Power Airport Performance and the Global Positioning System (GPS) satellite network. WAAS takes the technology a step further by using additional satellites that monitor and improve the precision and reliability of GPS signals. This complementary system to RNP allows Horizon to fly more precise approaches into every airport and enables landing in certain low-visibility weather conditions. Currently, seven of Horizon’s 48 aircraft are WAAS-equipped. Our goal is to equip all remaining 41 aircraft with WAAS technology by the end of 2012. At present, WAAS technology annually conserves about 150,000 gallons of jet fuel. WAAS will also enable Horizon to fly the RNP approaches developed for the Greener Skies program, saving the airline another 500,000 gallons per year. APU on Demand: This project uses advanced technology to eliminate the need to operate the auxiliary power unit (APU) during flights to and from Hawai‘i. The FAA approved this procedure after thorough testing showed APUs can be restarted reliably en route, saving Alaska an estimated 1 million gallons a year. 31 Airport Lighter-weight Carpet: Beginning this year, new Alaska Airlines aircraft deliveries will be supplied with new carpets that reduce aircraft weight by 60 to 90 pounds (depending on aircraft type). Carpet on existing aircraft will be replaced by attrition. When the project is complete, we estimate the weight savings will conserve about 60,000 gallons of fuel per year. While this represents smaller savings than some of our other projects, we believe every effort helps. Using an arrival procedure known as Optimized Profile Descent, aircraft descend continuously with their engines at idle to reduce noise and carbon emissions. Alaska Airlines collaborated with the FAA to develop this satellite-based navigation procedure in Anchorage and plans to use it at other airports in our route system. Oven Removals: One unutilized catering oven will be removed from each 737, reducing aircraft weight and saving an estimated 300,000 to 700,000 gallons of fuel each year. Engine Wash Programs: Alaska Airlines is running trials to determine if various engine-washing technologies will improve fuel efficiency. The final analysis will be completed in 2012. S H A R ING OUR POWERFUL NAVIGATION TECHNOLOGY Leading technology innovation that saves fuel and emissions. Alaska Airlines pioneered the development and introduction of Required Navigation Performance (RNP) in the mid-1990s to enhance the safety and reliability of its operations in terrain- and weather-challenged Juneau, Alaska. RNP, which uses onboard computers and the satellite-based Global Positioning System, also saves fuel and emissions by enabling aircraft to fly more direct routes than those available with conventional navigation. Alaska Airlines is the only domestic carrier with a fully equipped RNP fleet. We shared this technology with the aviation industry and now use RNP at nearly two dozen airports across our network. RNP is a cornerstone of the Federal Aviation Administration’s NextGeneration air traffic management system. 32 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Creating groundbreaking collaborations to shift the fuel we use. Air Group is collaborating with the Boeing Co., Port of Seattle, FAA and other industry stakeholders to lead the way into the future of aviation by fostering the development, testing and commercialization of sustainable alternative fuels. Biofuels represent a critical element in cutting aviation’s carbon footprint and are key to a sustainable future for the industry. Biofuels will enable us to fly cleaner, foster job growth in a new industry and insulate airlines from the volatile price swings of conventional fuel— which, in turn, will help make air travel more economical. Alaska began our biofuel journey in 2009 when we became the first domestic carrier to join the Sustainable Aviation Fuel Users Group (SAFUG), pledging ourselves to using only biofuels that meet high third-party standards for sustainability. We also support the Commercial Aviation Alternative Fuels Initiative (CAAFI(R)) through our membership in Airlines for America (A4A) and we’re members of the A4A Alternative Fuels Environmental Working Group. In July 2010, Alaska Airlines, Boeing, Washington State University, local airports and more than 35 other stakeholders launched Sustainable Aviation Fuels Northwest. SAFN is the nation’s first regional stakeholder effort to explore the feasibility, challenges and opportunities for creating an aviation biofuels industry in the Pacific Northwest. After extensive study, SAFN released a report in May 2011 that determined the region has the diverse feedstocks for biofuels, existing delivery infrastructure and political will needed to create a viable biofuels industry in the Pacific Northwest. There currently is no commercially available supply of aviation biofuels in the region or the nation. A copy of the report and summary may be viewed or downloaded at www.safnw.org. In November 2011, Alaska Airlines and Horizon Air launched the first multiple commercial flights in the United States powered by aviation biofuel. The two carriers operated 75 flights from Seattle to Washington, D.C., as well as roundtrips between Portland and Seattle using a 20 percent blend of sustainable biofuel. Approximately 30,000 gallons of biofuel blend was sourced from Dyanmic Fuels. SkyNRG brokered the deal to ensure that the biofuel portion was produced using Roundtable for Sustainable Biofuel (RSB) sustainability criteria. The fuel was produced from used cooking oil that met rigorous international aviation and military safety, performance and certification standards. The biofuel blend reduced our greenhouse gas emissions by 134 metric tons, the equivalent of taking 26 cars off the road for a year. These flights demonstrated the feasibility of biofuels to power commercial planes. While tomorrow’s fuels are ready to be used in today’s planes, the United States needs to develop a viable industry to provide an adequate and affordable supply of aviation biofuels for to benefit the industry and the environment. Even with a robust biofuels industry, airlines would remain partially dependent on fossil fuels under current standards that permit a maximum 50/50 blend with petroleumbased fuel for aviation applications. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 33 Alaska Airlines and Horizon Air launched 75 commercial flights powered by aviation biofuel in November 2011. Carbon Emissions From Vehicles The carbon footprint from our ground vehicles is minute compared with our aircraft fleet. But there are still oppor tunities to improve local air quality and reduce fuel consumption. Our best opportunity to reduce emissions from our ground support equipment (GSE) fleet is by switching from fossil fuel-powered to electric GSE wherever feasible. We are limited by airport infrastructure (space, charging stations and electrical grid modifications), weather conditions (ability of equipment to navigate snow and ice), and the eGSE market (for example, electric versions are not available for GSE such as deicing trucks, lavatory service trucks, etc.). Alaska Airlines’ goal is to increase motorized equipment that is electric from our current 10% to 20% in the Lower 48 states by the end of 2013. The Seattle eGSE project will help us achieve this goal. In 2009, we partnered with the Port of Seattle to replace fossil fuel-powered ground support equipment for Alaska and Horizon with electric equipment, with a commencement date of 2012. This project will replace more than 200 fuel-burning vehicles (aircraft tugs, belt loaders and bag tractors) with electric equivalents over two years. With airport electricity coming from clean hydropower, this will eliminate 3,000 metric tons of CO2 per year and improve local air quality. This project has been delayed to ensure completion of necessary electrical infrastructure upgrades, and we have revised our goal to begin replacing these vehicles in 2013. At Horizon Air, we’ve been strategically replacing fossil fuel-powered GSE with electric ones for more than six years. The number of all-electric vehicles has increased from less than 22% in 2005 to 65% of our motorized airport vehicle fleet in 2011. The Seattle eGSE project will replace 48 additional Horizon Air fuel-powered vehicles with emission-free equivalents. REDUCING GREENHOUSE GAS EMISSIONS INDUSTRY-WIDE Airlines for America (A4A), the industry trade association, joined with the International Air Transport Association and Regional Airline Association in adopting an industry-wide commitment to cut CO2 emissions in half by 2050, relative to 2005 levels. Alaska Airlines and Horizon Air oppose mandatory climate regulation on commercial aviation because we believe these requirements restrict the ability of all carriers to invest in fuel- and carbon-reduction efficiencies. Fuel represents our largest cost—a powerful incentive to foster voluntary innovation. 34 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Reducing energy use at our facilities. Los Angeles Terminal 6: Our newly renovated Terminal 6 at Los Angeles International Airport opened in March 2012 after 13 months of construction. This project consolidated and stream lined Alaska and Horizon operations with closer proximity to U.S. Customs checkpoints and airline codeshare partners. The facility, which includes our first LEED Silver-certified Board Room, incorporates numerous energy-efficiency and environmental features: • Ultra-high efficiency, low-flow water fixtures that save 30% over traditional fixtures. • Low-emitting adhesives, sealants, paints, wood laminates and furniture. • 75% of construction waste was sorted and recycled. • Energy-efficient lighting systems and controls and the use of green power purchased from local companies. • Sustainable baggage handling system, which adjusts to energy-saving mode during non-peak hours. • 84% of eligible appliances and equipment are Energy Star certified. Alaska Airlines Corporate Headquarters Upgrade: Upgrading and replacing the heating, ventilation and air conditioning (HVAC) system is projected to reduce energy usage by 20%. This will reduce our carbon footprint by about 170 • Efficient heating, ventilation and air conditioning systems (15% more efficient than California industry standards). ALASKA AIR GROUP ENERGY INTENSITY OF BUILDINGS Energy Intensity (Btu/SQUARE FOOT) The majority of our facilities are leased from local airports. Our five-year plan in locations where we own and operate offices, terminals, cargo facilities, and/or maintenance buildings is to renovate many of these existing structures with new lighting, heating systems and insulation to improve energy efficiency while reducing costs and emissions. We’re also incorporating Leadership in Energy Efficiency and Design (LEED©) principles into all of our standard facilities projects. A sample of some of our past and present energy-efficiency projects follows. 200,000 150,000 100,000 50,000 2008 2009 2010 2011 Air Group reduced building energy intensity by 19% toward our goal of a 30% reduction by 2020. Current data is not normalized for annual weather and temperature differences. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 35 Electric ground service equipment, like this belt loader, makes up approximately 65% of Horizon Air’s airport vehicle fleet. tons per year and save $27,000 annually in energy costs. Completed in August 2011. Horizon Air Seattle General Office Lighting Retrofit: Replacing older fixtures with more energy-efficient lighting is expected to reduce monthly electricity usage 38 percent and provide an annual cost savings of $6,000. The upgrade also prevents 68,000 pounds of CO2 from being released into the environment— similar to taking five cars a day off the road. Completed in July 2011. Nome Terminal Wind / Solar Energy Project: Alaska Airlines completed a firstof-its-kind wind turbine/solar panel installation at our Nome Airport facility in September 2011. The wind turbine / solar panel array is specially designed to operate in the severe arctic climate and is expected to provide 6% of the facility’s annual electricity needs. This project is intended as a test to determine the feasibility of pursuing alternative energy projects at our other airport terminals in the state of Alaska. All of these projects are helping us achieve our commitment to reduce energy consumption 30% (per square foot of building space) by 2020. Since our 2008 baseline year, we’ve reduced energy use by 19% (see graph on previous page). Energy-efficiency projects scheduled for the upcoming year include: • Anchorage Regional Headquarters: HVAC and lighting upgrades. • Petersburg Terminal: Remodel, including lighting, boiler, insulation, roof replacement, HVAC and electrical upgrades. • Portland Concourse A Offices: HVAC upgrades. • Prudhoe Bay Terminal: Lighting upgrades, window and door replacements. • Seattle McGee Building: Computer room air conditioning and electrical system upgrades. • Seattle Air Cargo: HVAC upgrades. • Seattle Horizon Air General Office: HVAC upgrades. • Seattle-Tacoma International Airport Board Room: HVAC replacement. Alaska Airlines completed a first-of-its-kind wind turbine-solar installation at Nome Airport in September 2011. 36 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Tackling our materials, waste and recycling. Providing service to more than 24 million passengers each year uses a lot of resources—approximately 24 million plastic cups, napkins and boarding passes, among other items. That’s why one of our key environmental strategies is to reduce consumption of resources and recycle inflight waste. Inflight Materials and Recycling Alaska Airlines and Horizon Air both take recycling seriously, but have slightly different approaches and circumstances. Horizon has been recycling inflight waste successfully since the late 1980s. Highlights since 2009: • Successfully trained Alaska CPA carrier SkyWest on inflight recycling procedures and standards. Preliminary data on a limited number of waste assessments in 2011 indicate SkyWest is capturing 90% of all recyclables and recycling 52% of all waste. • Recyclable paper coffee cups replaced non-recyclable polystyrene cups in the main cabin, reducing inflight waste to landfill. • Flight attendants collect 90% of all inflight recyclables. This is an increase T R A S H TALK Horizon Air’s decades of focus leads the industry. Horizon Air has been collecting and recycling food and beverage waste since the mid-1980s. In 2009, we conducted “waste assessments” and determined that flight attendants were diverting more than 85% of all recyclables from the trash. Horizon was recycling almost 70 percent of all inflight waste. Even coffee grounds were being composted. The Washington State Recycling Association took notice, presenting Horizon with its “Business Generator Recycler of the Year” award in 2010. of 7 percentage points since our last reporting period in 2009. • Actual waste recycled (by weight) has fallen from 69% to 49%. Contributing factors are believed to be: removing individual plastic water bottles now that all water is poured from a larger bottle (a net benefit to the environment overall); adding buy onboard snacks and picnic packs to our cabin service; and outside food and beverages brought onboard by our passengers. Alaska began its inflight recycling program through a grassroots effort by our Green Team in 2007. Two years later, we formed an ambitious goal to collect 100 percent of all recyclable material (plastic, paper, aluminum and glass) generated during inflight service. We began measuring our progress toward that goal in 2010, missing the mark by capturing 44 percent of all inflight recyclables. This made us realize that we couldn’t expect our flight attendants to collect all of the recyclables if we did not first ensure the materials they worked so hard to collect would actually be recycled by our contract catering kitchens. After contracting with a nationwide recycling vendor, 95 percent of our kitchens are now equipped to recycle A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 Recyclables CAPTURED: ALASKA AIRLINES 50 44% Materials Collection and Recycling: HORIZON AIR 49% 100 80 40 n 2010 30 37 83% 85% 90% 69% 60 49% n 2011 20 40 10 20 0 0 Collection rate commingled materials. We also increased our collection rate (the percent of recoverable materials diverted by flight attendants) to 49 percent in 2011 (see chart at right). To further advance this effort, we’ve made recycling a service standard in our Flight Attendant Manual instead of simply encouraging it. We’ve also increased the number of annual waste assessments to obtain accurate data. Previous assessments yielded helpful information about recycling, but were insufficient in sample size for statistical comparison. We’ve also identified inflight serviceware products that can be replaced with organic, sustainable, recyclable or com- n 2009 64% n 2010 n 2011 Collection rate postable alternatives. Here is a summary of our efforts in the past two years: • Replaced our non-recyclable polystyrene main cabin coffee cups with recyclable paper coffee cups. • Provided compostable plant-based cutlery in lieu of plastic cutlery to our main cabin passengers. • Added a vegan meal to our inflight menu for the main cabin. Alaska’s 2012 recycling goals include: • Increase our recycling collection rate to 70 percent. • Communicate proactively with our flight attendants to determine areas for improvement; provide guidance % recycled on separating materials and highlight airports that have robust recycling programs; and recognize outstanding collection efforts. • Engage with fleet service providers to ensure that cabin waste is collected and recycled. • Ensure that recycling capabilities are available at 100% of our flight kitchens. • Replace our aseptic juice box with one made of FSC-certified material. The recycling programs at Alaska Airlines and Horizon Air divert an estimated 800 tons of mixed recyclables from local landfills each year. 38 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Reducing materials use on the ground. Office Waste Alaska and Horizon operate as a tenant at most destinations throughout our system, where airports generally administer garbage and recycling programs. We work within the current waste and recycling management systems and collaborate with airport staff to make improvements. Many of our hub airports, such Portland and Seattle, have innovative and awardwinning recycling programs that we use to minimize our waste to landfill. At small airports and office buildings, the local staff is responsible for contracting with waste haulers and recycling vendors. This results in an uneven application of recycling policies and procedures from facility to facility. In general, data are not readily available to evaluate waste disposal and recycling practices at many of these locations, which provides an opportunity for enhancing and standardizing our waste management practices. In 2011, we began a project to streamline our recycling programs at our five largest corporate buildings. We conducted a complete assessment of the types and Air Group GREEN TEAM ENGAGES EMPLOYEES The Alaska Airlines / Horizon Air Green Team is an Employee Resource Group (ERG) whose mission is to educate, inspire and engage employees around environmental stewardship. The team accomplishes this through brown bag seminars, lectures, volunteer events and regular communications. The Green Team was instrumental in launching Alaska Airlines’ inflight waste recycling program and continues to provide assistance for routine waste assessments. More information about our ERGs appears on page 65. quantities of waste and the type and level of service utilized. We then developed a plan to improve and standardize these services. We will roll out our new recycling programs in 2012 and have committed to expanding this to our other facilities where we are responsible for managing waste disposal. Industrial Waste Industrial wastes such as hazardous materials are generated during aircraft and ground support equipment maintenance activities. The majority of our industrial wastes include lubricants, paints and thinners, sealants and adhesives, solvents and cleaners, batteries, and light tubes. Our hazardous waste policy is aimed at ensuring permanent disposal through treatment, recycling or thermal destruction of all regulated hazardous wastes. No hazardous waste is sent to landfills, even when allowed by law. Materials Use and Supply Chain Supply Chain Management is working to develop a sustainable procurement policy that will become a foundational part of our strategic sourcing and procurement processes. It will include developing measures of the effects on the environment of the products and services we use. Our main goal in the upcoming year is to build greater awareness with our staff through training on sustainable procurement principles. We also continue to A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 39 seek out more opportunities to reduce our impact to the environment from the products we use. This includes aircraft weight reduction, reduced fuel / energy use and evaluating local supply sources to minimize carbon emissions created through long-haul or air freight transportation. Paper Sourcing and Usage The responsible use of paper is one area that concerns many of our employees and provides an opportunity for improvement. With our use of boarding passes, baggage tags, coffee cups, cocktail napkins, office paper and technical forms, consumption is an important environmental impact for the airline industry. We also recognize that preserving and renewing our forests is a valuable strategy in managing our carbon dioxide emissions. We recently established a print and paper procurement policy. Our intent is to pursue the highest level of environmentally friendly paper and print resources that balance the economic and operational needs of the products we use. Key principles in our paper reduction policy are: Sorting inflight waste for recycling. • Reduce overall printing and paper consumption by working with internal customers to create reduction strategies. Reducing use is the greatest advantage to the environment and for economic success. • Strive for the most environmentally friendly paper and print choices by selecting FSC products and using EPA guidelines for minimum recycled content paper. Seek out chlorine-free processed papers that effectively balance environmental, economic and operational viability. • Work with our printer and graphic designers to identify the most environmentally sound choices for paper selection. 40 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y Addressing other environmental impacts. Deicing An additional area of concern related to water is deicing fluid management. Operating in cold climates requires a plan to ensure that frost / ice buildup on aircraft does not compromise flight safety. Today’s industry standard for ensuring safe flights during cold weather involves spraying aircraft surfaces with a diluted mixture of ethylene glycol or propylene glycol. These chemicals mix readily with water and snow and most reclamation methods are ineffective or impractical. The ability of glycol to biodegrade quickly is both positive and negative. On the plus side, it is relatively non-toxic and does not remain in the environment for an extended period. On the minus side, the quick biodegradation may remove oxygen from local waterways and harm aquatic life. Opportunities for reducing deicing fluid are restricted by safety considerations, FAA regulations, aircraft manufacturer procedures and available technology. Collecting and managing runoff is constrained by airport design and operations, available technology and fight safety. At many large airports, stormwater runoff is collected and treated; however, many other airports do not have deicing collection systems. In partnership with local airport authorities, Alaska Airlines and Horizon Air follow numerous best practices aimed at reducing deicing fluid runoff from deicing pads, vacuum trucks, ramp scrubbers, etc. All employees who deice are trained in procedures and best practices for preventing stormwater pollution at each airport we serve. Noise All of Alaska and Horizon’s aircraft are compliant with Stage 3 noise criteria as required by the FAA. Additionally, Alaska Airlines’ 737-NG (74% of our fleet) and Horizon’s Q400 aircraft meet Stage 4 regulations. Aircraft meeting Stage 4 standards are at least 10 decibels quieter (as measured at specified flyover, lateral and approach points) than the previous Stage 3 noise standards. Horizon’s Q400 is currently one of the quietest aircraft in domestic operation. Spills Accidents occasionally happen when handling airport chemicals such as jet fuel or deicing fluid and materials spill inadvertently. Our internal policy is to document and monitor all releases of 1 gallon or more (or smaller if it creates a safety or environmental concern). We rely on a network of employees who are specially trained in spill response, waste management and environmental issues. The “environmental coordinators” supervise and manage spills at the facility level. Most of our spills are limited to paved surfaces where environmental damage is avoided or limited. We documented 27 reportable spills in 2010 and 22 reportable spills in 2011. Of those,15 were considered significant (more than 25 gallons, affecting flight operations or requiring cleanup by external responders). None of these releases resulted in discharges to the environment. Occasionally, there are remediation projects that arise from cleaning up historic industrial uses and fuel spills. Our policy is to work with local airports to restore these sites to local and state cleanup standards. Alaska Airlines has three open sites with ongoing remediation projects in Anchorage, Fairbanks and Juneau, Alaska. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 41 A ground service employee deices an Alaska Airlines Boeing 737 before takeoff. Water Use Water consumption is not a material environmental impact for Alaska Airlines or Horizon Air. Water is used mainly for sanitary purposes, with relatively minor amounts used for maintenance, washing, and / or landscape irrigation. Airport water, used for onboard coffee and sanitary service, is generally not metered separately. Annual metered water consumption in 2010 and 2011 was approximately 18 million gallons. Potable Water Bottled water is provided to our passengers during onboard beverage service. Coffee / hot water is supplied to our customers via an onboard water system and is sourced through the municipal drinking water supply at local airports. All of the equipment we own and operate that is used to provide drinking water (water carts, aircraft water tanks, etc.) is routinely sanitized in accordance with EPA, FAA and Food and Drug Administration regulations. Periodic random samples are collected from watering points onboard the aircraft to verify the water meets EPA drinking water standards. In 2011, we analyzed samples from our entire fleet and found no instances of E. coli bacteria contamination. Committed to compliance 0 Number of sanctions for noncompliance and amount of monetary fines Compliance A dedicated Environmental Affairs Department is tasked with ensuring that Alaska Airlines and Horizon Air ground operations are compliant with EPA, state and local environmental regulations. They are assisted by specially trained employees, known as “environmental coordinators,” who are assigned to each of our facilities. Compliance is verified during an internal environmental audit program conducted by Environmental Affairs staff. Federal, state and local authorities also visit our facilities to verify compliance with the rules and regulations. In 2010 and 2011 approximately 22 Alaska and Horizon facilities were inspected by various government agencies. None of these inspections resulted in monetary fines or sanctions for non-compliance with environmental laws or regulations. 42 H O W W E R E A C H F O R E N V I R O N M E N TA L S U S TA I N A B I L I T Y 10 ways we are reducing our environmen IN THE AIR 1. INVESTMENTS IN EFFICIENT AIRCRAFT Alaska Airlines’ Boeing 737-900 jet and Horizon Air’s Bombardier Q400 turboprop are the two most fuel-efficient aircraft in their class. Page 30. 2. WINGLETS To further improve the aerodynamics of our aircraft, Alaska is using winglets (turned up extensions at the tips of the wings) to increase fuel efficiency 3% to 5%. Page 30. 5. BIOFUEL Alaska and Horizon have been advancing and promoting the development and use of alternative sustainable biofuels in the Pacific Northwest. In 2011, we were the first domestic carriers to fly mulitple scheduled routes powered by a biofuel blend. Pages 34-35. 6. NOISE More than 80% of our combined fleet (all Q400s and 737-NGs) meet FAA stage 4 noise requirements, which are at least 10 decibels quieter than current stage 3 requirements. Page 42. IN THE AIR A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 43 ntal impact. 3. WEIGHT REDUCTION By removing redundant equipment and replacing other equipment with lighter-weight alternatives, Alaska saves an estimated 585,000 gallons of fuel each year. Page 31. 7. CARBON EMISSIONS Alaska Air Group’s fleet improvements and flying efficiencies have reduced carbon dioxide-equivalent emissions by 30% per revenue passenger mile since 2004. Pages 30-32. 8. MATERIALS Alaska and Horizon endeavor to use service materials that can be easily recycled or are sourced sustainably whenever feasible. Page 39. 4. Flight Management System Technology Required Navigation Performance (RNP) and Wide Area Augmentation System (WAAS) technology use a combination of onboard computers and satellites to fly more precise approaches, reduce fuel burn and enable landings in low-visibility weather. Pages 32-33. 9. RECYCLING Alaska and Horizon flight attendants divert more than 800 tons of cups, cans, bottles, newspapers and other materials from landfills each year through their award-winning inflight recycling. Pages 38-39. ON THE GROUND 10. GROUND POWER AT GATES Using ground power instead of the aircraft auxiliary power unit while airplanes are parked at the gate annually saves Alaska Airlines approximately 3 million of gallons of fuel. Page 30. Ways we advance economic sustainability: Record adjusted net income. Employee bonus payments. Regional economic development. Creating jobs and business. Alaska Air Group maintained a strong financial position in a tough economic environment, thanks to the work of our dedicated employees, substantial investments in a fuel-efficient fleet, collaborative relationships with labor and our loyal customers. Air Group provides the backbone of economic prosperity for some of the regions in which we operate. Directly and indirectly, we help create jobs, support small business and diverse suppliers, and provide the necessary transportation infrastructure for economic activity. IN THIS SECTION 46 Creating Direct Economic Value 48 Contributing Indirect Economic Impact 46 H O W W E A D VA N C E E C O N O M I C S U S TA I N A B I L I T Y Creating direct economic value for our employees and investors. Alaska Air Group has made substantial changes to our business during the past decade, which arguably has been the most difficult in commercial aviation history. As a result of these changes and the ongoing dedication of our people, Air Group has become one of the most profitable airline companies in the nation. Alaska is also one of only two carriers founded before airline deregulation in 1978 that has never declared bankruptcy. Air Group achieved record full-year adjusted net income of $287.4 million, or $3.92 per diluted share, in 2011 compared with our previous record of $262.6 million, or $3.57 per diluted share, in 2010 (figures adjusted for 2-for-1 stock split in March 2012). As of Dec. 31, 2011, Air Group held $1.3 billion of long-term debt (including current portion); $1.2 billion equity; and capitalized operating leases of $800 million. Our adjusted debt-to-capital ratio was 62% : 38%. Air Group paid its nearly 13,000 employees almost $1 billion in wages and benefits in 2011—24% more than in 2001. While large concentrations of our employees live and work in Washington, Oregon, California and Alaska, they are also located in many of the cities we serve throughout the United States and in Canada and Mexico. Labor organizations represent 83% of Alaska employees and 47% of those at Horizon. Based on our business philosophy and financial success, we offer our employees attractive careers with jobs that pay competitively, include great benefits and provide a positive economic influence on the communities we serve. Our compensation philosophy is to provide competitive base pay rates, market-based benefits packages, and the same generous incentive pay plans for every employee. Wages vary significantly by job category due to different professional certification requirements of many airline jobs. Nearly all full-time employees who reach the top of their respective pay scales, however, earn annual income that is near or above the United States’ average annual household income of $51,914 (2006-2010, per U.S. Census). Incentive pay provides additional compensation. In 2011, Air Group employees earned almost $73 million in incentive pay—or nearly one month’s pay for most people. These bonuses represented 25% of our company’s profits. The incentive pay came from two separate programs. Our Operational Performance Rewards Program pays a monthly bonus of $50 to every employee when we meet our on-time performance goal and another $50 for achieving our customer satisfaction goal. The Performance Based Pay program rewards every employee with an annual bonus based on achieving targets measuring safety risk, customer satisfaction, costs and profit. Additionally, Air Group contributed nearly $280 million to its defined-benefit pension plans, despite having no required contribution, and provides employees with a generous marketbased 401(k) retirement program. Air Group employees improved their productivity 9.5% in 2010 over the previous year and another 4.5% in 2011 (measured by number of passengers served per full-time employee). We still lag several key competitors and will strive to keep improving productivity while retaining our high-quality customer service and operational performance. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 47 PERFORMANCE EXCELLENCE #1 On-Time Major North American Airline 2010 and 2011 (Alaska Airlines) (Data source: FlightStats.com) Some highlights of Air Group’s economically related accomplishments include: “We are pleased to report record adjusted earnings for the second year in a row [2011]. The improvement was due to schedule optimization and network expansion, • Increased our capacity 4.7% in 2010 high load factors, lower non-fuel unit costs, and industryand 6.8% in 2011. leading customer service and operational performance. • Alaska and Horizon added service to We have made many changes over the past decade to 25 new markets during the past three transform our business and build a foundation for years. sustained profitability and measured growth, and we • Alaska ordered 15 new aircraft and accepted delivery of three Boeing 737- will continue to make the necessary changes as we move 800s in 2011. forward.” • Achieved a 12-month return on invested capital of 10.7% in 2010 and 11.7 percent in 2011. • Completed a $50 million share repurchase program in early January 2012. Since 2007, Air Group has invested $262 million to repurchase 8.4 million shares (pre-split). • Redesigned alaskaair.com to establish more direct customer relationships and increase Air Group revenue. This led to a December 2011 record of more than 55 percent of total bookings on our website rather than through third-party sales channels. BILL AYER, Chairman of the Board air group compensation n incentive pay n wages & Benefits $1,100M $1,000M $900M $800M $700M 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 48 H O W W E A D VA N C E E C O N O M I C S U S TA I N A B I L I T Y Contributing indirect economic impacts. Supporting Small and Local Suppliers Air Group recognizes the importance of supporting local, small, and women- and minority-owned businesses. Our supplier diversity program provides many benefits to the company and regional economies in which we do business. Purchasing goods and services from diverse suppliers strengthens our ties to local communities and our customer base while promoting competition, increasing quality and lowering costs. Sourcing with diverse suppliers also spurs innovation, improves our responsiveness, ensures compliance for government contracts, and contributes to our value and reputation in the communities where we fly. Our spend with diverse suppliers exceeded $99 million in 2010 and $109 million in 2011. One key way we support supplier diversity is by getting involved. Air Group is an active corporate member of the Northwest Minority Supplier Development Council (MSDC®), a regional affiliate of the National MSDC; Win with Washington (WIN), a women-owned business organization; and the ASTRA Women’s Business Alliance, a regional affiliate of the Women’s Business Enterprise National Council. Air Group also participates on the MSDC Board of Directors, and in many other local and regional outreach, matchmaking and supplier education events throughout the year. Overall, Alaska Airlines and Horizon Air provide an economic benefit to every one of the more than 90 cities we serve. About half of our nearly 13,000 employees live and work in Washington state’s Puget Sound region, where Air Group plays a significant economic role. We also contribute substantially to two other local economies: Alaska and Hawaii. Supporting the State of Alaska It’s difficult for those who do not live in The Last Frontier to fully grasp the immense and diverse landscape that makes up Alaska. The state boasts more coastline than the rest of the nation combined. There are more than 1,300 miles that separate the southernmost city, Ketchikan, with the top-of-the-world community of Barrow. Alaska Airlines serves 19 communities in the state of Alaska and only three are accessible by road. With fewer miles of paved roads than the smallest state of Rhode Island, Alaska’s remote nature and limited road infrastructure makes air transportation an absolute necessity. Alaska Airlines plays a critical role in its namesake state’s economy, which includes resource industries that include oil and gas, mining and seafood as well as tourism. Federal military spending makes up the balance of the state’s economy. Oil and Gas: Alaska Airlines flies more than 79,000 people and some 2.9 million pounds of cargo to Prudhoe Bay each year. The community is located at the start of the Trans Alaska Pipeline System (TAPS) and the heart of the oil and gas industry in the state. More than 630,000 barrels of oil a day flowed through TAPS in 2011, which represented 10% of the nation’s daily consumption and more than 90% of state revenues. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 49 heLPING IN HAWAI‘I $1.2B contributed to Hawai‘i’s economy in direct visitor spending by the roughly 700,000 visitors we flew in 2011. Seafood: Wild Alaska seafood has long been a significant part of the state’s economy and the industry represents Alaska’s largest employer. Alaska Airlines plays a key role in sustaining this industry. In 2011, we shipped more than 16.9 million pounds of fresh Alaska seafood to market with an estimated resale value of $150 million. Tourism: The visitor industry continues to grow and contribute to the state’s economy and is the second-largest employer in Alaska. Nearly 1.6 million tourists visited the state in 2011 and spent in excess of $1.4 billion. Many of these visitors traveled on Alaska Airlines. Bringing Positive Economic Impact to Hawai‘i Since we began service to Hawai‘i in October 2007, we have grown from 21 to more than 150 flights a week and now serve four islands from eight destinations along the West Coast and in Alaska. More than 60% of our Hawai‘i nonstop markets are not served by other airlines and more than 70% of them originate from secondary West Coast gateways. Providing a convenient, direct connection to the Islands from markets that Alaska flies more than 150 flights a week to Hawai‘i, which represents 20% of the carrier’s network. previously did not exist has helped Hawai‘i attract a new visitor base and boosted its economy. In 2011, we carried roughly 700,000 visitors to Hawai‘i, contributing to nearly $1.2 billion in direct visitor spending and $125.2 million in Hawai‘i state government tax revenues. In addition, our flight crews stayed in 138 hotel rooms per night, providing more than $6.5 million to Hawai‘i’s visitor industry. As a result of our presence, 350 jobs were added to Hawai‘i’s workforce. We also helped local small businesses. We began working with husband and wife teams in both Līhu‘e and Kona to cater our flights to the Mainland. With these contracts, both companies were able to hire a total of 12 more employees and generated more than $1.7 million in additional annual revenues for their businesses. How we serve: Dedication to safety and compliance. Caring for our customers and people. Giving back to our communities. There is something special about the airline business. Air Group flies thousands of passengers and pounds of cargo each day with an unwavering commitment to safety, operational excellence and exceptional customer service. Ours is a culture of compassion and caring, where our people have the opportunity to touch the lives of millions of travelers every year with untold acts of kindness. We call it Alaska Spirit and Horizon Heart. IN THIS SECTION 52 Ensuring Safety & Satisfaction 58 Developing & Caring for People 60 Partnering with Labor 64 Contributing to the Community 52 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Driving for safety excellence. The safety of our customers and employees at Alaska Airlines and Horizon Air overrides any other consideration. We ensure safety by complying with all external safety standards and procedures, applying more vigorous internal policies and practices, and encouraging our employees to report all actual and potential hazards. Air Group has made tremendous advances to improve our safety culture during the past decade. This culture starts at the top with the Board of Directors Safety Committee and permeates throughout the organization to station- and department-level safety committees and frontline employees. Our Safety Committee, chaired by former FAA administrator and National Transportation Safety Board chair Marion Blakey, is tasked with monitoring our entire safety system. Passenger Safety We apply our safety standards uniformly across all of Alaska and Horizon’s operating divisions, our CPA carrier SkyWest, and all airline codeshare partners. This “single level of safety” ensures that information is shared and high safety standards and policies are consistent between all companies that serve our passengers. One of the many ways we strive to improve is through our comprehensive safety reporting systems, which aim to identify and prevent incidents before they happen. Our people have a variety of mechanisms to voice their safety concerns, and the duty to report any potential or existing hazard falls on each and everyone in the company. Our reporting system is comprised of irregularity reports in all operating divisions, Aviation Safety Action Program (ASAP) reporting for nearly all frontline work groups, and the Safety Hazard Report or Safety Hotline reported directly to the Safety Division. Except for willful disregard of safety procedures, no employee will ever be disciplined for reporting a safety hazard or event. Safety reports are examined to identify hazards; determine appropriate safety and / or operational improvements; monitor the effectiveness of corrective actions; and proactively promote employee awareness of potential opportunities for improvement. The collected information is reviewed and analyzed to facilitate early detection and improved awareness of operational deficiencies and adverse trends. With continuous improvement in mind, we are designing and implementing what the FAA and industry call a Safety Management System, or SMS, over the next three years. SMS builds upon many systems already in place at Air Group to A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 Every Air Group employee is responsible for safety. Among them are nearly 950 highly skilled technicians who maintain the Alaska and Horizon aircraft fleets. provide better and more efficient oversight. It is integrated across all aspects of the organization to ensure safety risks are managed to acceptable levels. This Safety Management System will change the way we analyze information and positively affect the safety of our employees and passengers by raising safety awareness, proactively predicting and correcting issues, and promoting continuous improvement. Having an open, transparent and nonpunitive safety culture is at the heart of the company’s philosophy. A robust safety reporting culture paired with ongoing operational oversight keeps awareness of safety issues high at the frontline employee level. 53 54 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Improving employee safety, health and wellness. Employee Safety Fundamentally, ensuring our employees’ safety and helping them be healthy is a natural extension of our corporate ethics and values. Work-related injuries lower morale, cost time and money, and can create hardship for our people and their families. Many of our employees work in challenging environments of wind, rain, snow, heat and high noise levels. They work in and around multimillion-dollar machines performing tasks that can, unfortunately, result in injury. One of our primary goals is to reduce the risk of injuries by proactively identifying safety concerns in order to prevent injuries and accidents before they happen. We accomplish this through our culture of reporting, system-wide safety committees, and by monitoring and investigating injuries and accidents. Employee Safety Committees Employee Safety Committees are active groups of volunteer employees who discuss incidents and injuries, collaborate, and create solutions to enhance safety at their location. Although only some state agencies require these committees, Alaska Airlines and Horizon Air strive to set the highest standards by making the groups mandatory at all of our locations—whether they’re required or not. Air Group’s Safety Division supports these committees through training and recognition. We convene annual safety symposiums where select members of each local safety committee are invited to attend seminars and hands-on training to improve their effectiveness. Monitoring and Preventing Employee Injuries Air Group’s Injury Review Boards, which meet monthly, have successfully identifed injury trends, raised awareness for employees and applied appropriate measures to reduce worker injuries. Following the adage “what gets measured gets managed,” Alaska and Horizon track employee on-the-job injuries (OJI) and lost-time injuries (LTI). OJIs are overall injuries, including minor bumps and bruises. LTIs are more significant injuries requiring a doctor visit and missing at least one day of work. After several approaches to goal-setting in the past several years, we’ve developed challenging yet flexible and realistic safety goals based on our average injury rate for the preceding three years. We believe this approach allows for goals to reflect performance longevity rather than a single-year extreme (high or low). Alaska Airlines’ goal for 2012 is to reduce lost-time injuries by 5% over baseline (average of the preceding three years) to 4.66 LTI per 100 employees—with a stretch goal of 4.42. From 2010 to 2011, Alaska’s LTI rate increased about 4% from 5.0 injuries per 100 employees to 5.19. This resulted from injuries reported by several work groups, notably flight attendants, as well as a slight change in the way we calculated the rate. We’re increasing our focus on this issue—particularly in Inflight Services—to reverse the trend and lower injuries. Horizon’s 2012 goal is to reduce our losttime injury rate to 2.82. We’ve exceeded our goals for the past two years, lowering the LTI rate from 2.95 to 2.26 (surpassing the 2010 and 2011 goals of 3.7 and 3.00, respectively). Horizon’s on-the-job injury rate also dropped from 7.94 to 5.88 per 100 employees. We will continue to strive for no lost-time injuries at both Alaska and Horizon. No employees died in the line of duty during the 2010-2011 reporting period. 55 A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 Alaska Air Group established a goal many years ago of providing a marketbased, competitive package of pay and benefits, including comprehensive health care coverage, that remains affordable to the company and our employees. We offer several medical plan options to meet the requirements of our diverse population. Reducing Smoking For almost three decades, we’ve hired non-nicotine users in states where that is a permitted requirement for hire, resulting in fewer smokers among our population than similarly sized companies and contributing to an overall healthier population. For those employees and family members who do smoke, we offer a nationally recognized cessation program at no cost. We’re also working with the American Cancer Society for other ways to strengthen our commitment to a healthier work force. ALASKA AIRLINES & HORIZON AIR EMPLOYEE INJURY RATES OSHA RATE PER100 EMPLOYEES ANNUALLY Health and Wellness 9.00 7.00 6.00 5.00 4.00 3.00 2009 2010 2011 ü Alaska OJI n ALAsKA LTI ü HORIZON OJI n HORIZON LTI Alaska Airlines On-the-job injuries Lost-time injuries Horizon Air 2009 2010 2011 2009 2010 2011 8.01 4.53 8.31 5.00 8.45 5.19 8.94 3.70 7.94 2.95 5.88 2.26 Rates are the number of injuries per 100 employees annually (average of 2,000 work hours) Focusing on Wellness While we want to make quality health care accessible to our employees and their families when they need treatment, we also want to help them become and remain healthier so they can lead productive lives at work and at home. Air Group provides a variety of ways to help people take care of themselves and their families, including our subsidized health club agreements, Weight Watchers support, health fairs, corporate flu shot program, and on-site CPR and first aid training. 56 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Ensuring customer satisfaction. While we operate using airplanes and technology, we recognize that ours is fundamentally a people business. Measuring customer satisfaction and communicating goals with our employees has become an integral part of our business. The primary way Air Group measures satisfaction is through a monthly survey that asks customers to rate our service in a variety of touchpoints throughout their journey—from booking a trip to collecting baggage at their destination. About 3,000 surveys are reviewed each month. Four key metrics comprise an overall satisfaction score. As the chart to the right shows, Alaska Airlines and Horizon Air have consistently achieved their goals during the past two years (which built on steady improvement during the previous three years). Good businesses continually strive to improve, and in 2012 Alaska increased its customer satisfaction goal “We’re invested, not only financially, but with company pride that has an emotional level. We treat our guests as if they are coming into our home, choosing to have a sincere, face-to-face connection that sets us apart from other carriers.” LYNN MLLARD, Alaska Airlines Flight Attendant to 78% while Horizon raised its target to 82%. On-time performance is also a fundamental aspect of good service, and both airlines have also consistently exceeded higher goals in each of the past two years. We also employ two unique means of staying connected with our most frequent customers. One way is by hosting townhall style lunch meetings with our top-tier frequent fliers in a different Alaska Airlines city each month. We also meet with a panel of 12 elite travelers every quarter to help us define our customer strategies. All of these efforts have contributed to Alaska Airlines winning four consecutive J.D. Power awards for the highest customer satisfaction rating among traditional carriers in North America. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 57 CUSTOMER SERVICE HIGHEST IN CUSTOMER SATISFACTION AMONG TRADITIONAL NETWORK CARRIERS IN NORTH AMERICA, FOUR YEARS IN A ROW 2008-2011 (J.D. Power and Associates) 2010 Goals 2010 Results 2011 Goals 2011 Results Customer satisfaction survey (monthly online survey results) 75% Exceeded goal 12 of 12 months 77% Exceeded goal 11 of 12 months On-time performance (% of flights arriving within 15 minutes of schedule) 80% Exceeded goal 12 of 12 months 83% Exceeded goal 11 of 12 months 78-80% Exceeded goal 11 of 12 months 81% Exceeded goal 9 of 12 months ALASKA HORIZON Customer satisfaction survey Alaska and Horizon have both exceeded operational and customer satisfaction goals over the past two years. Meeting these goals is an important component of our employee incentive programs. ALASKA AIRLINES 2011 EMPLOYEE SURVEY HIGHLIGHTS Employees rated this statement highest in the entire survey: Employees responded with the lowest rating to this statement: There is a strong emphasis on customer service at this company. 89% favorable: +1 point from 2009 survey Within this company people are held accountable for poor performance. 30% favorable: +1 point from 2009 survey Below are a few of the statements among the most favorable: Below are a few responses among the least favorable: I am proud to work for this company. 84% favorable: +3 points from 2009 survey My ideas and suggestions count. 39% favorable: +2 points from 2009 survey The people I work with cooperate to get the job done. 84% favorable: +3 points from 2009 survey There is open, honest two-way communication in this organization. 41% favorable: +2 points from 2009 survey I believe this company has an outstanding future. 76% favorable: +10 points from 2009 survey I regularly receive appropriate recognition when I do a good job. 43% favorable: No change from 2009 survey We strongly believe the key to satisfying customers is engaging employees. These 2011 employee survey results demonstrate that our people understand the importance that Air Group puts on customer service. See the next page for more on employee engagement and development. 58 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Developing and caring for people. Employee Engagement Our people are at the heart of our accomplishments, and we believe that treating them well is the best way to inspire great performance. That requires more than simply paying good wages and benefits. Air Group focuses on many efforts to improve employee engagement: foster diversity and inclusion to make every employee feel valued, attract a wide spectrum of job applicants and reach the best business decisions; provide educational opportunities for our people and for the next generation (through charitable giving) that lead to career advancement; maintain a culture of candid communication that clearly articulates our challenges, successes and goals; and much more. We use periodic surveys (typically every 18 months) as one tool for monitoring the pulse of employee engagement and identifying our strengths and opportunities for improvement. The 2011 results showed that Air Group’s overall level of employee engagement decreased slightly since the 2009 survey. Engagement increased 1% at Alaska and dropped 16% at Horizon. The results at Horizon were attributable to the major business transformation it launched in September 2010. Its goal was to achieve consistent profitability while maintaining superior operational performance and customer service. Key components included transitioning to a single fleet of Bombardier Q400 turboprop aircraft; becoming an all-capacity purchase agreement carrier for Alaska Airlines; adopting Alaska’s brand externally; reducing costs; and providing market-based pay and benefits aligned with appropriate productivity goals. An abbreviated employee survey conducted in June 2012, after much of the business transformation had been completed, indicated employee satisfaction with Horizon as a place to work had increased 33% since the 2011 survey. The Alaska results found that three-quarters of employees believe the airline has a bright future—a significant increase since 2009. This likely reflects Alaska’s improving profitability and growth since we made substantial business changes in the mid-2000s to remain competitive. However, it is clear more must be done to break down silos, communicate honestly and openly, and hold people A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 59 C A R I NG FOR EACH OTHER Employee Assistance Funds help employees through financial hardship. accountable who aren’t performing well. We can also do a better job of listening to each other, and better communicate our future vision to employees. Collectively, Alaska Air Group is working to more clearly share our vision, support employee involvement, improve recognition and professional development opportunities, and establish open channels of communication. Flight Path This one-day seminar was developed in response to survey data and provides employees with the opportunity for interactive learning with company officers and other leaders as well as time to ask questions. Flight Path represents a collaborative effort by more than 50 trainers across the company. It is designed to help employees better understand the financial, operational and cultural aspects of the airline business, experience our aircraft “turn” process using an iPad, and see how their individual efforts contribute to our company’s success. Learning & Development Strategy Education at Air Group comes in many forms—from online computer skill development to classroom sessions to Alaska Airlines Captain Al Brunelle founded the Alaska Airlines Employee Assistance Fund (EAF) in 1992 to help fellow colleagues who may be suffering financial hardship due to a medical or catastrophic event. Assistance granted is a gift—not a loan—and is not required to be repaid. In 1995, Horizon Air founded its own Emergency Assistance Fund. Along with offering grants to employees in need, Horizon’s EAF provides interest-free loans that can be repaid through payroll deduction. Both EAFs are nonprofit organizations made up of employees who volunteer to serve on the respective boards of directors, representing all divisions of Alaska and Horizon. One hundred percent of contributions go toward assisting employees. The Alaska Airlines EAF is striving for a donation goal of $1 per paycheck from every employee, and about 30% of the company’s work force gave to the organization in this way in 2011. The EAF raised approximately $286,000, which helped some 73 employees pay their mortgages, COBRA insurance, car payments and insurance, and medical and grocery bills while they recovered from an injury or illness. About 10% of Horizon employees participate in their EAF through payroll deduction, auctions and other donations. The Horizon EAF helped employees cover basic living expenses along with medical bills. on-the-job and employee engagement training. Leadership training is provided to three target groups: emerging, current and experienced leaders. Elective (or volunteer) development opportunities for interested employees are also offered in such areas as airline economics, business writing and effective presentation skills. While these programs continue to be popular among new and emerging leaders, we need to enhance learning opportunities for experienced leaders. Our Talent Development team has outlined a five-year plan for implementing a learning organization philosophy at Air Group. 60 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Partnering with labor. Labor Relations Alaska Airlines’ workforce is 83% unionized while 47% of Horizon Air employees are represented by a collective bargaining group. During 2010 and 2011: • Alaska signed a five-year agreement with the Aircraft Mechanics Fraternal Association as well as four-year contracts with the International Association of Machinists for its clerical, office and passenger service employees, and the Transport Workers Union for its dispatchers. • Horizon signed five-year contracts with the International Brotherhood of Teamsters for its pilots and aircraft technicians, a four-year agreement with the Transport Workers Union for its dispatchers, and a three-year contract with the Canadian Auto Workers for station employees in Canada. In 2011, all remaining union groups ratified contract agreements that included participation in Air Group’s Performance Based Pay (PBP) program. This milestone achievement aligned everyone at both airlines around a common incentive pay plan to help all of our people focus on the same initiatives and issues. PBP is designed to pay annual bonuses at the target rate of 5% of eligible earnings. In 2010 and 2011, PBP paid 9.4% and 6.7%, respectively. working together Alaska Airlines leadership and the company’s Labor Coalition have met quarterly for 10 years in a proactive effort to collaborate and improve relations between management and unions. Alaska and Horizon seek to work proactively with union leaders of each of our represented work groups. In addition to regular interactions between unions and management, company executives and leaders from all collective bargaining groups meet quarterly. These forums enable union representatives to hear updates and ask questions about the company’s performance, strategic initiatives and other issues. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 61 Alaska Air Group Labor Contract Summary Union Workgroup Total Employees Contract Ratified Contract Amendable Association of Flight Attendants (AFA) Alaska Airlines Flight Attendants 2,774 Mar. 10, 2009 May 1, 2012 International Association of Machinists and Aerospace Workers (IAMAW) Alaska Airlines Customer Service, Reservations, Operations, Accounting Specialists and Clerical Agents 2,660 Feb. 1, 2011 Jan. 1, 2014 Air Line Pilots Association (ALPA) Alaska Airlines Pilots 1,416 May 19, 2009 Apr. 1, 2013 Aircraft Mechanics Fraternal Association (AMFA) Alaska Airlines Aircraft Technicians 626 Nov. 15, 2011 Oct. 17, 2016 International Association of Machinists and Aerospace Workers (IAMAW) Alaska Airlines Ramp Service and Stores Agents 587 Dec. 17, 2009 July 31, 2012 Transport Workers Union (TWU) Alaska Airlines Dispatchers 36 May 4, 2011 March 24, 2015 International Brotherhood of Teamsters (IBT) Local 1224 Horizon Air Pilots 583 Nov. 30, 2010 Dec. 14, 2015 Association of Flight Attendants (AFA) Horizon Air Flight Attendants 511 Dec. 21, 2009 Dec. 21, 2011 International Brotherhood of Teamsters (IBT) Local 986 Horizon Air Aircraft Technicians 323 Dec. 15, 2010 Dec. 16, 2014 Canadian Auto Workers (CAW) Horizon Air Canadian Station Employees 70 May 26, 2010 Feb. 14, 2013 Transport Workers Union (TWU) Horizon Air Dispatchers 15 Oct. 4, 2010 Aug. 26, 2014 Total 9,601 About 9,600 employees at Alaska Airlines and Horizon Air belong to a collective bargaining unit. 62 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Creating an environment of inclusion. Prioritizing Diversity Inclusion Advisory Council Demographics Air Group’s shared goal at Alaska and Horizon is to foster a diverse and inclusive culture where highly engaged employees drive excellent operational performance and exceed customer expectations. The IAC consists of management and frontline employees who participate on four subcommittees to support our diversity and inclusion strategy. These committees are: Ad Hoc Consultancy, committed to quickly researching and responding to issues as they arise; Discussion Starters, committed to facilitating quick diversity conversations into regular meetings; Employee Resource Group (ERG) Support, committed to helping our ERGs achieve their goals; and Demographics, committed to analyzing company data. Increasing the diversity in our leadership teams continues to be a significant opportunity for Air Group, especially with respect to people of color. Creating this culture is a journey. At Air Group, this has included educating employees about inclusion and the value of diversity, developing an Inclusion Advisory Council, advancing community outreach, and supporting the development of Employee Resource Groups. Education Alaska Airlines started pursuing diversity training more than a decade ago with the goal of having all employees attend a class. Today, all new employees undergo diversity training within their first 30 days of work and all Air Group leaders are required to attend a full-day workshop on leading diverse teams. We are are working to include diversity concepts in all initial and recurrent training programs. We also offer deeper learning on specific topics that is available to all employees at least once a month. Community Outreach Many of our community outreach events are supported in large part by our internal diversity programs. Through these programs we support groups such as Washington Women’s Education and Employment (WWEE), Hire America’s Heroes (HAH), Habitat for Humanity, the Organization of Black Airline Pilots (OBAP), Women in Aviation International (WAI), Washington State University Future Cougars of Color, United Negro College Fund and many others. “We recognize this is an area we can do better in and we are committed to making changes,” President and CEO Brad Tilden says. “I want anyone who joins our company to be able to look at our leadership teams and know they can get there. And, fundamentally, a diverse and inclusive environment is simply the right thing to do.” A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 female & people of color as a PERCENTage of Air Group SUPERVISORS & ABOVE female & people of color as a PERCENTage of Air Group DIRECTOR & ABOVE 50% 50% 40% 41% 38% 40% 30% 30% 20% 20% 11% 10% 12% 0 34% 22% 10% 10% 9% 0 2001 n FEMALE n PEOPLE OF COLOR 2001 2011 female & people of color as a PERCENTage of all Air Group positions 60% Increasing diversity in leadership positions continues to be a goal of AAG. We are proactively seeking ways to recruit, develop, and support women and people of color. 2011 50% 53% 51% 40% 30% 17% 20% 20% 10% 0 2001 2011 63 64 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Nurturing employee involvement and contribution. Employee Resource Groups Eleven ERGs were active at Alaska and Horizon at the end of 2011, each supported by a vice president or higher executive sponsor. Each ERG is uniquely positioned to support company initiatives in ways that are important to the collective group. ERGs provide a powerful structure for helping employees, supporting community outreach such as grass-roots environmental projects and contributing to the success of business projects. Our Hawai‘i project team, for example, partnered with the Pacific Islander Culture Club to ensure an authentic experience for customers in our new Hawai‘i markets. The Green team is supporting an environmental restoration event, among other activities. Our Women’s Interactive Network group has focused on providing networking and career development help to members. Green Team ERG members participate on a restoration project at Snoqualmie Point Park, Wash. EXPOSURE/GOODWILL VOLUNTEER EFFORTS $13,400 2,679 Employee dollars donated via ERGs Employee volunteer hours with ERGs 561,946 Exposure (number of people engaged in the community by ERG events) INTERNAL (PERSONNEL / DEVELOPMENT HOURS): 2,318 Employee attendance at ERG events A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 65 Employee Resource Groups at Air Group Group Name ACCESS: Employees with Disabilities Executive Sponsor Mission / Specialty Major Activities Fred Mohr VP, Maintenance and Engineering Community outreach, internal and external policy assistance, charity outreach and coordination with community events Northwest Disability Community Boards, MDA Activities, Best Practice Workshops AMG: Air Group Military Group Ben Minicucci Chief Operating Officer Military recruiting and screening, Education Hire America’s Heroes Events, on hiring and retaining veterans, engage- Military Base Visits, Recruitment ment and professional development Fairs Bill Ayer Chairman of the Board of Directors Professional development, promotion of people of color, community engagement and activities Habitat for Humanity, NBMBAA conference, UNCF BOOMERS: Baby Boomers Gary Beck, VP, Flight Operations Internal programs for Boomer employees, personal development, engagement and education of Boomers in the work force Social gatherings, chapter building throughout the Alaska / Horizon system, retirement education GLOBE: GLBT Employees Glenn Johnson President, Horizon Air Events for the LGBTQ community, best practice promotion for company around benefits and workplace equality, marketing support Pride parades in Portland, Seattle and elsewhere in the system, community promotion with the GSBA, Out & Equal Seattle affiliate Keith Loveless VP, Legal and General Counsel Internal environmental projects, recycling best practice events and outreach, airport policy and procedure around resource use Earth Day projects in Portland and Seattle, promotion of Green initiative at Alaska / Horizon, internal recycling program revisions, Green project proposals LCRG: Latin Culture Resource Group Brad Tilden President and CEO Internal candidate/professional development, market review of new products/ services for Latin market Portland Timbers outreach, Hispanic Seafair, 2011 National Society of Hispanic MBAs conference NEN: Native Employees Network Joe Sprague VP, Marketing Employee engagement and community building, professional development, State of Alaska outreach Prom Princess, State of Alaska Federation of Natives, Seattle Spirit Walk Rock & Roll Marathon, Great Aloha Run Honolulu, Sunset Celebrations Festival, BERG: Black Employee Resource Group GREEN: Environmental ERG PICC: Pacific Islander Culture Club Andrew Harrison VP, Planning and Revenue Management Marketing of Hawai‘i, Pacific Island community events, internal and external networking WING: Women’s Interactive Network Jeff Butler VP, Customer Service Andy Schneider VP, Inflight Services Resume workshops, WWEE Personal development, supporting and community breakfast and clothes fostering women in leadership roles, drive, hosting of female board of networking, career advancement and advice directors, interview tips Y-GEN: Young Generation Kris Kutchera VP, Information Technology College outreach, Y-GEN specific engagement, network and promotions Toys for Tots drive, food drive, trivia night, MSU promotional event, UW promotions 66 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Contributing to the community through spirit and caring. Alaska Air Group’s corporate giving program is a fundamental part of who we are as a company and is founded on two of our core corporate values—Spirit and Caring. We proudly strive to help many worthy and wonderful causes within our communities. 2010 2011 2012 Goals In-Kind & Monetary Support Employee Matching Gifts Dollars for Doers Charity Miles Alaska Airlines Foundation $5,640,000 $100,000 $71,462 43,507,592 miles $55,000 $7,120,000 $163,000 $92,700 46,431,922 miles $65,500 $7,000,000 $100,000 $100,000 * $98,000 * We promote the Charity Miles program to our customers but have not set a contribution goal. Corporate Giving: Monetary & In-Kind Support We focus our giving on communities we serve now or in the near future and where a significant number of our employees live or work. We favor organizations and efforts that are most likely to enhance a community’s cultural, economic and environmental vitality and improve the quality of life for its citizens. Our corporate giving has extended to five strategic areas: • Arts / Culture: Our giving focuses on art education and increased resources for the arts. We believe that building audiences and generating support for the arts are crucial to the growth of the next generation and continued strength in our communities. Organizations that receive our support include the the Anchorage Symphony, Lionel Hampton Jazz Festival, GIVING BACK: Air Group is setting contribution goals for the first time in 2012 Portland Jazz Festival, Seattle Art Museum, Seattle Symphony and Sitka Summer Music Festival ArtsFund, among others. • Education: Teaching institutions and programs that are of importance to our employees and their families are supported through our Employee Gift Matching and Dollars for Doers programs (donations and volunteer hours are also matched for other 501(c)(3) organizations). Some of our key partnerships include the Independent Colleges of Washington, Oregon Alliance of Independent Colleges & Universities, University of Washington and the University of Alaska system, as well as many other schools and scholarship programs. • Civic & Environment: We help protect our environment by supporting organizations such as the Alaska Raptor Center, National Forest Foundation, The Nature Conservancy, and Washington Wildlife and Recreation Coalition, just to name a few. • Medical (Emergency / Research): Alaska and Horizon regularly respond to the need for health and human services relief, especially in the state of Alaska where transportation infrastructure limits access to medical facilities. Through in-kind contributions, we assist hundreds of individuals with their emergency and medical transportation needs. Our partnerships with Angel Flight West and Shriners Hospitals provide well A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 67 Air Group employees helped staff a recent Make-A-Wish call bank event. over 1,000 complimentary passenger seats each year for those needing treatment in another city. • Social / Community Services: From Make-A-Wish Foundations to Special Olympics, Alaska and Horizon have established many partnerships within our communities. Our in-kind support of air transportation enables many organizations to raise money and grant special wishes to children. Starting in 2012, the Alaska Airlines Corporate Giving program will focus on two primary areas of interest: medical / social and youth / eductaional issues. In addition to our giving program, the Alaska Airlines Foundation is a 501 (c)(3) private foundation based in Anchorage, Alaska. A small number of cash grants ranging on average from $5,000 to $15,000 are given to other nonprofit organizations classified as public charities. These grants focus on educational efforts that address a unique need or value to a community. The Alaska Airlines Foundation has donated more than $600,000 over the past 12 years to a number of groups. Through the Alaska OUr heart and spirit Employees organized or were involved in more than 56 community events in 2011. While we do not have an accurate system to track our employee volunteer hours, we do know some 480 employees logged more than 4,500 hours of volunteer work. Our 2012 goal is to launch a new volunteer website to more accurately gather and measure employee volunteer efforts. Airlines Foundation we are able to support educational achievement by focusing on programs that promote and support vibrant communities. All grants are reviewed and approved by the Alaska Airlines Foundation Board of Directors. Employee Giving If our employees are engaged in the community they’re more engaged with Alaska Airlines. Giving back to the community is an integral part of our corporate vision and our culture. Alaska DID YOU KNOW? 65% of upper management at Alaska and Horizon serves on the boards of nonprofit organizations. Air Group encourages and supports the hard work employees are doing as volunteers in their communities. The Dollars for Doers program gives employees $10 per hour of volunteer work, to be donated to the non-profit organization up to $1,000 per year, per employee. Across our system, our employees use their hearts and hands serving as board members with non-profit organizations, volunteering in their communities and participating in fundraisers. In many cases, our employees also engage with these community groups through the Employee Resource Group program, both as volunteers and financial supporters. 68 H O W W E E M B R A C E C O R P O R AT E R E S P O N S I B I L I T Y Examples of our corporate citizenship. INSPIRING YOUNG PEOPLE More than 155 pilots, flight attendants, mechanics and other employees donated some 2,000 hours for our 2011 Aviation Day to help local Boy Scouts, high schoolers and other children learn about career paths in the aviation industry. The free events were held in Portland and Seattle to give 14to 18-year-olds a chance to learn how aircraft fly and explore career opportunities in aviation. Nearly 425 Boy Scouts from more than 150 troops in Oregon and Washington earned Aviation Merit Badges during the two events. Participants were able to visit the flight deck of a Boeing 737, inspect a jet engine, build and fly a glider model, and jump down the emergency evacuation slide of Alaska’s cabin simulator. Several employees, including CEO Bill Ayer and President Brad Tilden, flew their own light planes to the event. They were joined by an F-15 Eagle from the 142nd Fighter Wing of the Oregon Air National Guard. Air Force Academy and Civil Air Patrol representatives were on hand to talk about careers in military aviation. HELPING THOSE IN NEED In November 2009, Alaska and Horizon employees rallied around what has become an annual “Pack the Plane” project to fill a cargo aircraft with 5,000 bags (54,000 pounds) of food to benefit our local communities. Each station in the system is invited to participate by partnering with a local food bank. Food and money collected this way benefits almost every city we serve. We exceeded our goal in 2009 by packing two cargo airplanes with 64,000 pounds of food and $1,100 in cash donations from employees. In 2011, we raised $38,686 in financial donations and collected 12,600 pounds of food—the equivalent of packing 7½ cargo planes. ENLISTING OUR CustomeRS Alaska Air Group provides opportunities for our customers to participate in giving with our Charity Miles program. Members of the airlines’ Mileage Plan can donate some or all of their accumulated frequent flier miles to these charities: Angel Flight West, Dream Foundation, Fred Hutchinson Cancer Research Center, Hero Miles, Make-A-Wish Foundation, Medical Teams International, The Nature Conservancy, National Forest Foundation, and to a general charity pool that is used for disaster-relief organizations. In 2011, about 3,200 customers generously donated more than 43 million frequent flier miles to our Charily Miles program. GIVING BACK IN OUR HOME STATE As part of our commitment to the state of Alaska, we collaborate with community leaders throughout the state. Members of the Alaska Airlines Community Advisory Board decide on corporate contributions and how best to help the communities we serve. The board meets three times a year to decide on donations and talk directly with Alaska Airlines management about concerns, needs and potential solutions. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 69 Lumi, a snowy owl who had been found severely injured far from home, was given a new chance at life in the wild thanks to the Alaska Raptor Center in Sitka. Alaska Airlines flew the owl and her handlers from the center in Sitka to Barrow, Alaska, in 2011. Here, Lumi is released by members of the Ukpeagvik Inupiat Corp., an Alaska Native corporation with headquarters in Barrow. Alaska Airlines provides support to the Sitka Raptor Center by donating transportation for many injured and rehabilitated birds from all across the state of Alaska. In 2011, we helped to release a previously injured snowy owl back into its natural habitat north of the Arctic Circle in Barrow. Lumi, a snowy owl who had been severely injured far from home, had spent nearly eight months in captivity while she recovered at the center in Sitka, Alaska. In addition to providing transportation for the owl and Raptor Center staff, several of our employees participated in the release. SupportING OUR SOLDIERS As federal contractors, Alaska and Horizon have a regulatory obligation to strengthen military outreach efforts, but we also view this as a moral obligation. For this reason, Air Group has developed programs and forged strong community relationships to ensure we are reaching the men and women who have served our country. Air Group also has a Military Recruitment Outreach team that partners with AMG to ensure we are actively supporting the recruitment, retention and promotion of veterans. Our Fallen Soldier program was developed by 14 aircraft technicians who saw a need to ensure a respectful and seamless transfer of remains of soldiers killed in action. With military protocols in mind, this group developed a handbook detailing every step and built a mock casket for training. Protocols involve taking care of military escorts, who are required to stay with the remains of a fallen soldier at all times, as well as any family members who may be on the flight. Air Group will launch a military apprenticeship program in 2012 designed to increase the employability of veterans actively seeking civilian employment. The goal with this program is to engage veterans into specified temporary roles within the company so they can gain exposure to Air Group culture. Among our programs is the Air Group Military Group (AMG), whose mission is to partner with the company to help guide education and outreach efforts around our military. AMG was founded by Stephanie Cootsona, manager of baggage performance. Stephanie also serves in the Air Force Reserves as the first sergeant for the 446th Aerospace Medicine Squadron, is vice president of the First Sergeant Diamond Council for McChord Air Field, and serves as treasurer for Hire America’s Heroes. HAH is a 501(c)(3) organization sponsored by Air Group with goals that include connecting corporate employers with veterans seeking civilian employment. Patriotic baggage cart specially designed by AAG employees for the transport of fallen soldiers. Looking forward: Restating our commitment to sustainability. Continuing to advance our environmental, social, and economic sustainability is a strategic priority for Alaska Air Group. We are committed to working in partnership with our employees, customers, partners and suppliers to develop innovative solutions and continuous improvements that move our company and society toward sustainability. IN THIS SECTION 72 Alaska Air Group Mission & Values 74 Global Reporting Initiative Alignment / GRI Index 82 Invitation for Feedback 72 L O O K I N G F O R WA R D Alaska Air Group values. ALASKA AIRLINES SHARED VALUES CRITICAL SUCCESS FACTORS Alaska Spirit. Alaska Spirit is the heart of Alaska Airlines. It springs from our rich heritage as a pioneer in a state where aviation plays a vital role in the life of every resident. Throughout our system, our Alaska Spirit defines the unique character of Alaska Airlines. Our fun-loving, energetic and adventurous personality flows from this spirit, as does our belief in service and community involvement. From our Alaska Spirit comes the pride, passion and perseverance that sets Alaska Airlines apart. Safety. We have an uncompromising commitment to safety. The well-being of our employees and customers will override any other consideration. Resourcefulness. Our bias toward action and our readiness to adapt to change and to master difficult challenges exemplify the “can do” heritage of Alaska Airlines. We embrace an atmosphere where hard work, initiative and teamwork are a tradition, and where creativity and innovation flourish. Integrity. Our actions will reflect our absolute commitment to ethical and honest behavior. When faced with uncertainty, we will always use our best judgment to do the right thing. Professionalism. As proven professionals, we each bring a high level of individual skill, expertise and commitment to our work. We take great pride in the fact that our individual and collective accomplishments have earned broad respect and a reputation for safe, reliable, quality service. Caring. Caring about and helping people is the soul of Alaska Airlines. We regularly go the extra mile to help our customers, our community and each other with friendliness, caring and genuine concern. We believe our lives are enriched by individual acts of kindness and compassion. Continuous Improvement. Our continuous improvement is driven by the willingness of each individual employee to embrace change, to pursue innovation and creativity, and to learn. Quality People. We will attract and develop talented people who share the values and spirit of Alaska employees. Profitability. Our corporate and individual success depends upon consistently producing profits sufficient to support growth and provide a reasonable return to our investors. Quality Service. We differentiate ourselves from our competition by providing genuinely personal and caring service to our customers and continually finding better ways to meet their needs. Reliability. We will provide consistent, on-time service upon which our customers can depend. A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 73 HORIZON AIR SHARED VALUES CORE PROMISES TO CUSTOMERS Integrity. Integrity is the cornerstone value of Horizon Air. That means we have an uncompromising commitment to honesty and fairness—to being ethical, trustworthy and responsible in all we do. 1. Get them to their destination … Heart. “Heart” is what defines the unique spirit and character of Horizon—a family of energetic, optimistic and enthusiastic people who enjoy what they do. From their “heart” comes the pride, commitment and, above all, the caring that truly sets Horizon apart. 4. If things do go wrong, as sometimes they do, then “service recovery” can make all the difference. A warm smile, sincere concern and a skilled, empathetic response can often turn a negative experience into a positive one. Partnership. We value the partnership of talented individuals combining their efforts to achieve results beyond the sum of their independent contributions. Partnership at Horizon is built on a foundation of trust, cooperation and mutual respect. Innovation / Initiative. We encourage initiative, innovation and creativity throughout the organization. Drive, determination and hard work—coupled with the active pursuit of new and creative solutions—are essential to Horizon’s continued success. Continuous Improvement. We seek excellence in our business and are committed to an environment of continuous development, learning and improvement. We embrace change as a means to grow, both corporately and individually. 2. On time… 3. With their bags. 74 L O O K I N G F O R WA R D Global Reporting Initiative Index. STANDARD DISCLOSURES PART I: Profile Disclosures N/A: Not Applicable N/R: Not Reported P/R: Partially Reported 1. Strategy And Analysis SECTION DESCRIPTION PAGE 1.1 Statement from the most senior decision-maker of the organization. 2-4 1.2 Description of key impacts, risks, and opportunities. 6-11 2. Organizational Profile SECTION DESCRIPTION PAGE 2.1 Name of the organization. 14 2.2 Primary brands, products, and/or services. 14 2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures. 14 2.4 Location of organization’s headquarters. 14 2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report. 14 2.6 Nature of ownership and legal form. 14 2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries). 14 2.8 Scale of the reporting organization. 14 2.9 Significant changes during the reporting period regarding size, structure, or ownership. i, 14 2.10 Awards received in the reporting period. 14 3. Report Parameters SECTION DESCRIPTION PAGE 3.1 Reporting period (e.g., fiscal/calendar year) for information provided. i 3.2 Date of most recent previous report (if any). i 3.3 Reporting cycle (annual, biennial, etc.) i 3.4 Contact point for questions regarding the report or its contents. 82 3.5 Process for defining report content. 20 3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). i 3.7 State any specific limitations on the scope or boundary of the report. i, 34 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations. i 75 A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 3. Report Parameters SECTION DESCRIPTION PAGE 3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols. 27, 54-8 3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers/acquisitions, change of base years/periods, nature of business, measurement methods). N/A 3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report. i 3.12 Table identifying the location of the Standard Disclosures in the report. 74-77 3.13 Policy and current practice with regard to seeking external assurance for the report. i 4. Governance, Commitments, And Engagement SECTION DESCRIPTION PAGE 4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight. 14, 16-17 4.2 Indicate whether the Chair of the highest governance body is also an executive officer. 17 4.3 For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members. 17 4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. 17 4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance). 17 4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. N/R 4.7 Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity. 16 4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation. 16, 26, 72-73 4.9 Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles. N/R 4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance. 17 4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization. N/R 4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses. 32-34 4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond P/R 33 routine membership dues; or * Views membership as strategic. 4.14 List of stakeholder groups engaged by the organization. 21 4.15 Basis for identification and selection of stakeholders with whom to engage. 20 4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. 21, 56 4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting. 20, 57 76 L O O K I N G F O R WA R D STANDARD DISCLOSURES PART II: Disclosures on Management Approach (DMAs) G3 DMA DESCRIPTION PAGE DMA EC Aspects Disclosure on Management Approach EC Economic performance Market presence Indirect economic impacts 46-47 14-15, 48-49 48 DMA EN Aspects Disclosure on Management Approach EN Materials Energy Water Biodiversity Emissions, effluents and waste Products and services Compliance Transport Overall 26 1,56 16, 41 33 25 Disclosure on Management Approach LA Employment Labor/management relations Occupational health and safety Training and education Diversity and equal opportunity Equal remuneration for women and men 48 60-61 52,54 59 62 N/R Disclosure on Management Approach HR Investment and procurement practices Non-discrimination Freedom of association and collective bargaining Child labor Prevention of forced and compulsory labor Security practices Indigenous rights Assessment Remediation 48 16 60-61 16 N/R N/R N/A N/R N/A DMA SO Aspects Disclosure on Management Approach SO Local communities Corruption Public policy Anti-competitive behavior Compliance 66 16 33 16 16 DMA PR Aspects Disclosure on Management Approach PR Customer health and safety Product and service labelling Marketing communications Customer privacy Compliance Human Trafficking Business continuity and emergency preparedness Service quality Provision of services or facilities for persons with special needs 52 N/A N/R N/R 16 N/R N/R 2 N/R DMA LA Aspects DMA HR Aspects 36 34 41 N/A 77 A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 STANDARD DISCLOSURES PART III: Performance Indicators Economic SECTION DESCRIPTION PAGE EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. 46-49 EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change. N/R EC3 Coverage of the organization’s defined-benefit plan obligations. 46 EC4 Significant financial assistance received from government. N/R EC5 Market presence Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation. N/R EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. 48 EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation. N/R EC8 Indirect economic impacts Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement. 66 EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. 48-49 Economic performance Environmental SECTION DESCRIPTION EN1 Materials Materials used by weight or volume. EN2 Percentage of materials used that are recycled input materials. EN3 Energy Direct energy consumption by primary energy source. EN4 Indirect energy consumption by primary source. EN5 Energy saved due to conservation and efficiency improvements. EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. EN7 Initiatives to reduce indirect energy consumption and reductions achieved. PAGE N/A N/A N/R N/R 32-35 30-32 35 34-35 EN8 Water Total water withdrawal by source. EN9 Water sources significantly affected by withdrawal of water. EN10 Percentage and total volume of water recycled and reused. 41 N/A N/A 78 L O O K I N G F O R WA R D Environmental, continued SECTION DESCRIPTION PAGE EN11 Biodiversity Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas. N/A N/A EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas. EN13 Habitats protected or restored. N/A EN14 Strategies, current actions, and future plans for managing impacts on biodiversity. N/A EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk. N/A EN16 Emissions, effluents and waste Total direct and indirect greenhouse gas emissions by weight. EN17 Other relevant indirect greenhouse gas emissions by weight. N/R EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. 26-36 EN19 Emissions of ozone-depleting substances by weight. N/A EN20 NOx, SOx, and other significant air emissions by type and weight. 26 EN21 Total water discharge by quality and destination. N/A EN22 Total weight of waste by type and disposal method. N/A EN23 Total number and volume of significant spills. N/A EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally. N/A EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff. N/A 27 EN26 Products and services Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. EN27 Percentage of products sold and their packaging materials that are reclaimed by category. EN28 Compliance Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. 41 EN29 Transport Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce. N/A N/A Noise EN30 Initiatives to reduce noise 42 Overall Total environmental protection expenditures and investments by type. N/A 79 A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 Social: Labor Practices and Decent Work SECTION DESCRIPTION PAGE LA1 Employment Total workforce by employment type, employment contract, and region, broken down by gender. N/R LA2 Total number and rate of new employee hires and employee turnover by age group, gender, and region. N/R LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations. N/R LA15 Return to work and retention rates after parental leave, by gender. N/R LA4 Labor/management relations Percentage of employees covered by collective bargaining agreements. LA5 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements. N/R LA6 Occupational health and safety Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs. 54 LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and by gender. 54-55 LA8 Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases. N/A LA9 Health and safety topics covered in formal agreements with trade unions. N/R LA10 Training and education Average hours of training per year per employee by gender, and by employee category. N/R 60 LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. N/R LA12 Percentage of employees receiving regular performance and career development reviews, by gender. N/R LA13 Diversity and equal opportunity Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity. 17, 63 LA14 Equal remuneration for women and men Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation. N/R 80 L O O K I N G F O R WA R D Social: Human Rights SECTION DESCRIPTION PAGE HR1 Investment and procurement practices Percentage and total number of significant investment agreements and contracts that include clauses incorporating human rights concerns, or that have undergone human rights screening. N/R HR2 Percentage of significant suppliers, contractors and other business partners that have undergone human rights screening, and actions taken. N/R HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained. N/R HR4 Non-discrimination Total number of incidents of discrimination and actions taken. HR5 Freedom of association and collective bargaining Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights. N/A HR6 Child labor Operations and significant suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective abolition of child labor. N/A HR7 Forced and compulsory labor Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor. N/A HR8 Security practices Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations. N/R N/R HR9 Indigenous rights Total number of incidents of violations involving rights of indigenous people and actions taken. N/R HR10 Assessment Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments. N/R HR11 Remediation Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms N/R 81 A L A S K A A I R G R O U P S U S TA I N A B I L I T Y R E P O R T 2 0 1 2 Social: Society SECTION DESCRIPTION PAGE SO1 Local communities Percentage of operations with implemented local community engagement, impact assessments, and development programs. N/R SO9 Operations with significant potential or actual negative impacts on local communities. N/A SO10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities. N/A SO2 Corruption Percentage and total number of business units analyzed for risks related to corruption. N/R SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures. 16 SO4 Actions taken in response to incidents of corruption. N/A SO5 Public policy Public policy positions and participation in public policy development and lobbying. N/R SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. N/R SO7 Anti-competitive behavior Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes. N/R SO8 Compliance Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. 41 Social: Product Responsibility PR1 Customer health and safety Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures. PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes. PR3 Product and service labelling Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements. PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes. N/R PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. 56 PR6 Justice Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship. N/R PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes. PR8 PR9 N/R N/R N/R N/R Customer privacy Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. N/R Compliance Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. N/R 82 L O O K I N G F O R WA R D Invitation for feedback. We are committed to accurately and transparently reporting our environmental, social and economic impacts, risks and opportunities. Feedback, input and suggestions are welcome. Please email your comments to: www.alaskaair.com/ consumeraffairs. We are also interested in dialogue with all stakeholders about the issues and challenges of sustainability in our industry and business. © 2012 Alaska Air Group Innovating for our future 2013 Sustainability Report report Contents Alaska Air Group’s 2013 Sustainability Report Section 1: Introduction 4 Overview Message From Our CEO About Alaska Air Group Our Sustainability Strategy Section 2: Environment 14 Overview Emissions & Fuel Energy In Our Facilities Waste & Recycling Materials & Supplies Section 3: Society 37 Overview Passenger & Employee Safety Employee Attraction & Engagement Diversity & Equal Opportunity Supplier Labor Practices Corporate Giving & Community Support Section 4: Economy 55 Overview Economic Performance Hassle-Free Flying Section 5: appendix 64 Overview 5 Message From Our CEO 6 About Alaska Air Group 8 Our Sustainability Strategy 12 Section 1: Introduction Who We Are introduction Introduction environment economy society appendix Overview Integrating sustainability – it’s the right thing to do Alaska Air Group strives to be a good company, a good impacts of Alaska Air Group’s two carriers, Alaska employer, and a good steward for the environment. Airlines and Horizon Air. It covers business operations However, the airline industry is inherently wrought with and facilities owned or maintained by Alaska Air Group sustainability challenges. Although we’re making good during the reporting period, Jan. 1, 2012, through Dec. progress, we have a long way to go and a lot more to do. 31, 2013. Vendor operations and supply chain are not included. Integrating sustainability into our planning and business operations is a new and challenging journey. We have chosen to embrace these challenges, and take on sustainability enhancements that are important to the environment, our communities, and the advancement of the airline industry. Our intention in this report is to We are integrating sustainability into our business because it’s the right thing to do: transparently document the progress we’ve made, the challenges we’ve encountered, and the goals we’ve set for the upcoming years. This is our second full Sustainability Report, summarizing the environmental, social, and economic For Our Customers For the Environment For Our Company 5 introduction Introduction environment society economy appendix Message From Our CEO We’re taking the sustainability challenge head on The people of Alaska Air Group fly our customers to more than 100 destinations across North America and Hawaii, helping them take in some of the most stunning scenery in the world. This natural beauty is a regular reminder for us to take Brad Tilden care of our planet. More broadly, to us, being socially responsible means we need to run our business in a way that makes Alaska, and all of the people and communities we work with, stronger and healthier over time. So whether you’re a customer, a community member, an employee, a supplier or an investor, you should expect us to commit to policies and practices that help us all sustain ourselves and grow over the long run. One of our core values is that we’ll do the right thing. For us, running our business this way — with an eye on the long run — is simply the right thing to do. That’s why sustainability isn’t a separate program at Alaska. We integrate it into our business and we ask each of our leaders to adopt a long-term perspective, and manage their areas as if they’ll be here and responsible for the results 20 or 30 years from now. People Flight Path, an investment that gave leaders and employees a chance to spend time together and focus on our vision and how we all need to work together. Recent survey data indicates we have further opportunity to communicate openly and honestly with each other. u Our core promise to our customers is to get them to u For our communities, Alaska donated $7.6 million in 2013 their destination safely and on time. We’re implementing the FAA’s Safety Management System, which uses employee reports about risks and other inputs to help identify safety-related trends and mitigate those risks. to a variety of organizations that support youth and education, among other things. We were especially proud to support the construction of the new Raisbeck Aviation High School in Seattle. u We believe in treating our people well with generous pay and benefits and good working relationships so they enjoy their job and treat our customers well. As a smaller airline, we make the good pay and benefits work financially by balancing them with a strong focus on customer service and productivity. Importantly, Alaska is sharing our success with our employees, who are responsible for this success. For 2013, all frontline employees received performancebased bonuses of approximately one month of pay. Planet I’d like to share a few highlights of how sustainability is making us a successful business within the framework of the triple bottom line (people, planet and performance): u Minimizing the environmental impact of burning more than a million gallons of fossil fuel every day is a key challenge for our airline. By investing $4.3 billion to modernize Air Group’s fleet over the past decade, we’ve provided a better product to our customers, strengthened our finances, and reduced our carbon emissions by 30 percent. u Looking ahead, we want to help the industry meet its goal u To help align employees with our strategic plan, everyone in the company recently attended a daylong seminar called of capping the growth of carbon emissions by 2020. We’re retrofitting our Boeing 737s with split-scimitar winglets to 6 introduction Introduction environment further improve efficiency. And we recently completed an agreement with a company based in Hawaii that should enable us to use sustainable aviation biofuel on some of our flights by 2018. u Next Generation airspace management, which is being sponsored by the FAA and industry, offers huge opportunities for reducing fuel consumption, carbon emissions, noise, travel time and costs. Alaska will continue to play a leadership role in the implementation of NextGen. Performance u Our sustainable approach has led to record financial performance. In an industry where many folks don’t expect airlines to perform financially, we have exceeded our goal of a 10 percent return on invested capital for each of the past four years and we plan to maintain that performance over the long term. society economy appendix u We have fully funded all of our pension obligations to our employees. u Since 2007, we’ve repurchased 21 million shares of our stock, increasing returns for our owners by 30 percent. And we recently initiated, and then increased, our first quarterly dividend since 1992. We know we can’t successfully meet the needs of any of our stakeholders unless we meet the needs of all of them, and we believe the best way to do that is with a sustainable, long-term approach. Our people work very hard to carry out that vision, and we’re proud to have received multiple awards from J.D. Power, FlightStats.com and other groups for our customer service, environmental efforts and corporate giving. While we’re pleased with what we’ve done so far, however, we’re determined to accomplish much more. 7 introduction Introduction environment economy society appendix About Alaska Air Group Alaska Airlines + Horizon Air Barrow Prudhoe Bay Kotzebue Fairbanks Alaska Air Group is a publicly held incorporated entity, and the Nome holding company for two operating subsidiaries, Alaska Airlines (AS) and Horizon Air (QX). With headquarters in Seattle, the two carriers provide commercial passenger and cargo transportation Anchorage Cordova Bethel Dillingham King Salmon Kodiak Yakutat Glacier Bay / Gustavus Sitka Adak Dutch Harbor Juneau Petersburg Wrangell Ketchikan Edmonton services throughout North America and Hawaii. Calgary Kelowna Vancouver Bellingham Victoria Spokane Kalispell Great Falls Wenatchee Missoula Yakima Pullman Helena Lewiston Pasco Walla Walla Portland Billings Bozeman Seattle As the nation’s sixth-largest carrier, Alaska Airlines operates a fleet of Boeing 737 aircraft from hubs in Anchorage, Los Angeles, Eugene Medford Redmond/ Bend Minneapolis/St. Paul Sun Valley Boise Boston Chicago (O'Hare) Portland, San Diego, and Seattle. Horizon Air operates under a Omaha Salt Lake City capacity purchase agreement with Alaska Airlines. All seats on the Santa Rosa/Sonoma San Francisco San Jose regional carrier’s Bombardier Q400 aircraft are marketed and sold Monterey Reno/Lake Tahoe Sacramento Colorado Springs Kansas City Philadelphia Washington, D.C. -(Reagan NationalNational) St. Louis Oakland Mammoth/Yosemite Fresno/Yosemite Las Vegas Burbank Santa Barbara Ontario Los Angeles Palm Springs Long Beach Orange County Phoenix San Diego Tucson by Alaska Airlines. New York City / Newark Steamboat Springs/Hayden Denver Atlanta Dallas / Fort Worth Līhu‘e (Kaua‘i) Austin Honolulu (O‘ahu) Heavy aircraft maintenance is outsourced to U.S.-based vendors, and we contract out ground operations at many of our stations. Vendors are selected based on strict guidelines examining their safety record, training, diversity, innovation, and their hiring criteria. San Antonio Kahului (Maui) Houston Orlando Fort Lauderdale Kona (Hawai‘i) Loreto Los Cabos Mazatlan Guadalajara Puerto Vallarta Manzanillo Mexico City Ixtapa / Zihuatanejo 8 introduction Introduction environment society economy appendix about alaska air group: Honesty & Ethical Behavior A values driven company Our airlines share complementary values that define our character and guide decision-making and behavior. Proof Our Core Values Safety of our commitment to these values is apparent in the Professionalism daily actions of our employees — we put safety above all and do the right thing in the right way, every day. Caring Alaska Airlines Resourcefulness Integrity Code of Conduct Alaska Spirit In 2012 we updated our Code of Conduct and Ethics policy, and all employees are educated annually on the Safety new policy. It is an important tool that summarizes Integrity the rules, principles and behaviors that align with our core values, and is designed to promote a culture of open and honest communication where everyone feels Partnership Horizon Air Innovation / Initiative Continuous Improvement Horizon Heart comfortable raising questions or concerns about what constitutes ethical behavior. Doing business in this way is consistent with our corporate values. It has been central to our past success, and will be foundational to our future as Alaska Air Group continues to grow. Did You Know? Vendor Code of Conduct In 2013, we established a Vendor Code of Conduct to set clear standards to protect our vendor employees by promoting safe and fair working conditions. 9 environment introduction Introduction economy society appendix about alaska air group: Our Five Focus Areas And how they align Our Five Focus Areas are how we define our strategic priorities. In the past two years, we’ve made significant progress in each Focus Area as we work to integrate sustainability throughout our business operations. 1. Safety & Compliance Safety and compliance are the foundation of everything we do. We have an unwavering commitment to safety and compliance, and we will not compromise this commitment in the pursuit of other initiatives. 2. People Focus While airplanes and technology enable us to do what we do, we recognize that this is fundamentally a people business, and our future depends on how we work together to win in this extremely competitive environment. As we grow, we want to strengthen our small company feel while also providing people of all backgrounds equal access to opportunities based on individual abilities and performance. We will succeed where others fail because of our pride and passion, and because of the way we treat our customers, our suppliers and partners, and each other. Highlight Safety Management System: Highlight More than halfway through full implementation, Flight Path Seminar: our Safety Management System achieved Level 2 In 2013, all of our employees completed our Flight Path certification at the end of 2013, leading to: seminar. According to survey results, this led to a: Increased safety awareness ! Decrease in higher-risk incidents 13% increase in employee engagement 10 environment introduction Introduction 3. Hassle-free Customer Experience We cultivate loyal customer relationships by offering an intuitive and trouble-free experience at all touch-points that is enabled by industry-leading technology, and by reliable and best-in-class customer service. economy society 5. Low Fares, Low Costs & Network Growth We will become known for our low fares and high value in order to broaden our appeal, reduce our vulnerability to low-cost carriers, and fuel growth. We will fund low Highlight Alaska Airlines’ Mobile App: fares by relentlessly pursuing simplicity, low overhead Alaska Airlines’ new mobile app reached nearly 1.2 the preferred airline for all travelers living on the West million downloads in 2013, and consistently ranks: Coast by defending and growing Alaska and the Pacific 4½ to 5 stars by users. appendix and high productivity. We will establish ourselves as Northwest, and by growing Hawaii and California. We are targeting 4% to 8% annual growth for the Alaska mainline operation, assuming acceptable profitability. 4. Energetic and Compelling Brand We will create a deeper emotional connection between our brand, our people, our customers and our communities. We will position our brand as friendly, genuine, and relevant to a changing customer profile, and we will use our brand and our technology to develop a more direct relationship with our customers. We will Highlight Network Growth: Positioning ourselves for growth, in 2013 our fleet: grew by 10 aircraft entered 15 new markets be the industry leader in environmental stewardship. Highlight Supporting the Next Generation: In 2013, Alaska Airlines’ brand ambassador, Russell Wilson, helped us challenge more than 600 students to graduate and pursue long term goals. 11 environment introduction Introduction Reduce Our Facility Energy Consumption. economy society Reduce Consumption of Non-sustainable Resources. Eliminate Waste From Our Inflight Service and Facility Operations. Reduce Emissions in the Air and on the Ground. Make Flying Easy. Low Costs, Low Fares, and Network Growth. Attract, Retain and Advance Diverse Employees. appendix Our 2020 Sustainability Strategy Embed Ethical Labor Practices Into Our Supply Chain. Be Recognized as a Great Place to Build a Great Career. Support Enhanced Educational and Social Outcomes in Our Communities. Achieve the Highest Possible Level of Safety for Every Employee, Every Customer, Every Flight, Every Day. 12 Overview 15 Emissions & Fuel 17 Energy In Our Facilities 26 Waste & Recycling 28 Materials & Supplies 32 Section 2: Environment Addressing Our Impacts on the Planet introduction environment environment society economy appendix Overview We fly people to beautiful places; let’s keep those places beautiful. Environmental sustainability presents many challenges to the airline industry. Transporting millions of passengers every year requires enormous quantities of Our environmental strategy strives to reduce: petroleum-based fuels that are costly and impact the environment. Tons of waste are generated from inflight services, unsustainable materials are often chosen, and large amounts of energy are consumed in ground facilities. At Alaska Air Group, we care about the environment Emissions from Planes and Equipment Waste from Flights and Other Facilities Energy Use in Our Buildings Consumption of Non-sustainable Resources and are finding innovative ways to reduce the impact of our services, our facilities, and our equipment. In order to take action and lead the aviation industry toward a more sustainable future, our environmental strategy encompasses four main areas. 15 environment environment introduction economy society appendix Overview: Achievement Highlights 1 Emissions From Planes and Equipment that would fill: reduced fuel use by: 10Million 15 gallons since 2011 olympic size pools & weigh the same as: 2,700 school buses 2 Waste From Flights and Other Facilities we’ve saved: that would fill: 2,861tons of recyclables going to landfills since 2011 & weigh the same as: 1,635 1.16 Cars olympic size pools fuel efficiency measures include: Alaska & Horizon are the only U.S. carriers that recycle on every domestic flight. Adding 12 new fuel-efficient aircraft #1 3 Installing winglets Use of cutting edge satellite navigation procedures Using electric ground service vehicles amount of passenger waste Cut in 1/2 the we’ve sent to landfills since 2010 Alaska Airlines ranked first in fuel efficiency among U.S. domestic carriers in 2013 by the International Council on Clean Transportation. Energy Use in Our Buildings we’ve saved: 24Million kBtu since 2008 we’re making Progress: that’s enough Electricity to power: 4 680 Homes for one year Consumption of Non-sustainable Resources 2.4Million pieces of paper are saved each year by our switch to iPad® tablet technology we expect to save: 665TONS of trees annually through our switch to 100% recycled paper hygiene products 16 introduction environment environment society economy appendix Emissions & Fuel Tackling our industry’s biggest challenge The airline industry contributes to climate change and local air quality problems by burning jet fuels, using ground support equipment (GSE), and through energy use in buildings and facilities. Increased awareness of environmental impacts and health concerns has resulted in global efforts to mitigate aviation’s contributions to climate change and local air quality. At Alaska Air Group, we believe it’s important to do our part by investing in technologies to reduce emissions in the air and on the ground. We approach emission & fuel use solutions in two categories: Aircraft Ground Service Equipment 17 environment environment introduction society economy appendix Emissions & Fuel: Aircraft Emissions & Fuel Use Efficiency Making progress on a lofty goal The airline industry has articulated a strategy to mitigate environmental impacts by capping industry-wide CO2 emissions by 2020 and cutting emissions in half by 2020 Goals Alaska Air Group is committed to decreasing our emissions in the air by: 2050 1. With aircraft fuel consumption contributing more than 99% of our Scope 1 and Scope 2 carbon emissions 2, Alaska Air Group supports the industry’s comprehensive and balanced energy strategy, and we’re focused on ensuring the highest potential fuel efficiency from our fleet. Reduction in Greenhouse Gases (GHG) intensity: Decreasing fuel consumption and associated emissions by 20% (gallons per revenue passenger mile, or RPM) at Alaska Alaska Air Group 2.8% Decrease since 2012 Airlines, over a 2012 baseline. A total reduction of 30.4% since our 2004 baseline3 year. Using sustainable aviation biofuel at one or more of our airport locations (given Our emissions reduction strategy encompasses three main areas: economic feasibility and adequate supply). Alaska Airlines 2.3% Decrease since 2012 Progress A total reduction of 30% since our 2004 baseline3 year. Maximizing fuel efficiency in aircraft is similar to how you would improve the fuel efficiency of your personal What We Fly How We Fly The Fuel We Use vehicle. To obtain the highest level of fuel efficiency, you begin by purchasing the most efficient model on the market and maintain the engine to perform optimally. Then, remove any unnecessary weight, travel at optimal Horizon Air 4.0% Decrease since 2012 A total reduction of 28.1% since our 2004 baseline3 year. speeds using direct routes, and limit idle time. Finally, similar to carpooling, fill every seat to maximize fuel efficiency per passenger mile. 1 Relative to 2005 levels 2 Scope 1 includes direct emissions from sources such as aircraft, vehicles, and generators. Scope 2 includes indirect emissions, such as purchased electricity. 3 Our baseline has been updated due to the availability of improved primary data that was unavailable at the time of the original calculation, and reflects a revision in aircraft fuel factors and emission factors due to industry updates. 18 introduction environment environment society economy appendix Emissions & Fuel: What We Fly It all begins with our fleet Alaska Airlines ordered 50 new Boeing 737 aircraft in the fall of 2012, part of a plan to replace older fleet models Less Drag Means More Efficiency New Scimitar Winglets with larger, more efficient aircraft. Thirty-seven of the new jets will be MAX aircraft, which are expected to be 1 In 2014, Alaska Airlines will begin installing new performance-enhancing split winglets on all Next Generation 737 aircraft, increasing efficiency another 1.7% over current winglets. While 1.7% doesn’t sound like much, this will reduce our fuel consumption (and associated emissions and costs) by 58,000 gallons per aircraft every year. 13% more fuel-efficient and cost at least 10% less to operate per seat mile than the most efficient of Alaska’s current aircraft. Horizon operates a fleet of 51 Bombardier Q400 aircraft. Optimized for short-haul operations, these turboprops Without winglets 2 are large, fast, quiet, and the most fuel-efficient aircraft in their class. Blended winglets 3 – 5% more efficient than #1 When purchasing aircraft, we consider the composition, aerodynamic qualities and fuel efficiency of each plane. By maintaining a young fleet and upgrading our 3 airplanes with state-of-the-art aerodynamic and engine improvements, we operate the two most fuel-efficient aircraft fleets in their class. Split Scimitar winglets 1.7% more efficient than #2 “Reducing fuel consumption has been a top priority at Alaska Airlines for years. Thanks to the hard work and dedication of our employees, we’ve cut our carbon emissions by 30% per passenger mile since 2004. Investing in split winglets will further reduce our fuel use and continue our efforts to be the industry leader in environmental stewardship.” — Mark Eliasen, Vice President of Finance and Treasurer, Alaska Air Group 19 environment environment introduction economy society appendix Emissions & Fuel: How We Fly It’s not just what we fly, but how we fly it Maximizing the efficiency of our aircraft is critical. Not only does this help reduce our GHG emissions, it helps with operating costs. Fossil fuel represents our New Strategies We’re Using to Conserve Fuel Include: 1 largest operating cost, giving us an inherent economic Auxiliary Power Unit (APU) on Demand Savings: 3 Over 1M gal/yr incentive to minimize the amount we burn and make Implemented in 2012, this program the most out of what we use. uses advanced technology to eliminate onboard APU on our Alaska Airlines Hawaii flights, fuel is required for every flight. By studying each saving more than 1 million gallons of fuel a year. GPS satellite networks and Required Navigation Performance (RNP) procedures to improve accuracy and reliability, allowing us to approach airports with precision even in low- the start of our second engines before takeoff (single- visibility conditions. WAAS is estimated to save engine taxi) and optimizing arrival profiles, we were more than 3 million gallons a year. Every 1M gallons of fuel saved equals 2 Improved flight planning & performance monitoring Improved performance flight Savings: 1,872 passenger vehicles taken off the road 118 tanker trucks filled with gasoline 650,000 gallons of fuel annually. Estimated 1.1M gal/yr planning monitoring and helps accurately predict the amount of fuel required OR 650,000 gal/yr with this technology, which uses airplane’s performance, average taxi times, delaying able to reduce the amount of fuel our fleet carries by Estimated All of Horizon Air’s aircraft are equipped the need to continuously operate the In 2013, we fine-tuned our calculations on how much Savings: Wide Area Augmentation System (WAAS) 4 Engine enhancements & drag improvements Savings: 1.5% so the aircraft is not carrying excess fuel and All of our newly purchased 737s include unnecessary weight. These and other weight- engine enhancements and drag improve- saving measures contribute to the savings of an ments that save up to 1.5% on fuel use. estimated 1,148,650 gallons of fuel annually on Alaska Airlines flights. 20 environment environment introduction 5 Using Ground Power at the Gates By using society Savings: fuel and use the airspace inefficiently. The Greener Approximately Skies Project leverages the GPS satellite network and 3M gal/yr ground power other technologies to fly shorter, continuous descent and preconditioned air while aircraft are approaches that enhance safety, save fuel, and economy appendix Traditional Step-down Approach decrease emissions and noise. parked at the gates, instead of running the aircraft auxiliary power unit (APU), we save an Greener Skies is a key success that shows the potential estimated 3 million gallons of fuel each year. of the FAA’s Next Generation air traffic management system, which will transform the U.S. airspace for the 21st century. After two years of testing and refinement, airport Greener Skies Optimized Profile Descent new procedures became operational in March 2013; 6 Greener Skies Program Savings: 2m gal /yr Partnering with Boeing, the Federal all Horizon Air flights and three-quarters of Alaska engines idled airport Airlines flights arriving at Seattle-Tacoma International Airport now use these improved procedures. Aviation Administration (FAA) and the Port of Seattle, Alaska Airlines Estimates are that Greener Skies will save more than 2 has been instrumental in piloting a new method for million gallons of fuel annually for all all airlines whose airport approaches that’s revolutionizing our skies. planes are equipped with appropriate technology. This translates into saving approximately 22,400 metric Airport arrival routes are traditionally founded on tons of CO2 — equal to the emissions contained in outdated ground-based navigation systems and 96 rail cars of coal. Noise exposure for an estimated stair-step descents that waste large amounts of 750,000 people in the Puget Sound region has also Greener Skies The Greener Skies Project leverages the GPS satellite network and other technologies to fly shorter, continuous descent approaches that enhance safety, save fuel, and decrease emission and noise. been reduced. 21 introduction environment environment economy society appendix Emissions & Fuel: The Fuel We Use Incentivizing a new fuel market Fuel is a necessity in air transportation, and we require support research efforts at the FAA’s Center of Excellence this resource in significant amounts. Although we’re for Alternative Jet Fuels and the Environment, led by proud of our fuel-efficiency efforts, we think we can do Washington State University and the Massachussetts better. Institute of Technology. Sustainable fuels provide one of the most promising In 2013, we also signed an off-take agreement with solutions for reducing airline emissions but, unlike Hawaii BioEnergy to purchase sustainable aviation ground transportation, our industry does not currently biofuels from the Hawaiian Islands beginning in 2018. By have alternative, commercially available sources of collaborating with industry partners, we plan to continue power — all of the fuel we use is from non-renewable engaging with and incentivizing biofuel producers to sources. create a new commercial aviation biofuel market. Alaska Air Group is helping to foster the development, testing, and commercialization of sustainable alternative fuels within the airline industry by engaging with Biofuels offer three key benefits: technology companies along the biofuel development supply chain. We were a founding stakeholder in Sustainable Aviation Fuels Northwest (SAFN), and in 2011 we were the first U.S. carrier to fly regularly scheduled flights using biofuels. In 2013, we committed Reduced Emissions Job Creation Less Price Volatility to be a collaborator and advisory committee member to 22 introduction environment environment society economy appendix Challenges Commercial aircraft are expensive to buy, fuel, fly Feedstock for biofuels must not only meet rigorous and maintain, and the design and integration of environmental criteria, but it must be produced in efficiency modifications can take decades to come sufficient quantities to maintain or lower the cost of into production. Meeting the industry’s emission fuel production. Our biofuel-based flights in 2011 cost reduction goals by 2050 will require manufacturers six times more than conventional fuel, making their to produce more fuel-efficient aircraft, the FAA to continuation financially unjustifiable as a business implement an updated air traffic management system, decision. and fuel producers to supply commercially available quantities of cost-effective and renewable aviation fuels Finally, in addition to supply availability, aviation biofuels (commonly referred to as sustainable biofuels). must be able to “drop in” to the existing transportation and storage infrastructure at each airport. Industry experts predict that aircraft will rely on liquid fuels for at least another 40 years, so developing Alaska Air Group is constantly evaluating opportunities sustainable aviation biofuels is critical to reducing to partner with producers and suppliers that may emissions. However, the aviation biofuel industry is still be able to supply commercial quantities of biofuel in its infancy. Several pathways for fuel production have that meet the required quality standards in strategic been proven using a variety of feedstocks, but most airport locations, that can be delivered within existing have not been certified by ASTM International, and transportation and delivery infrastructure, and are cost- they have not been scaled up to commercial quantities. competitive with conventional fuels. Carbon Offsetting Although there are a range of carbon offset credits options available for our passengers to choose from, they are not currently offered directly through our website. Instead, we choose to spend our time and resources on innovative solutions that directly address the causes of the challenges we face. 23 environment environment introduction society economy appendix Emissions & Fuel: Ground Support Equipment (GSE) Emissions Tackling emissions on the ground Emissions from our GSE fleet represent less than 1% will eliminate 2,000 metric tons of CO2 annually, save of our overall carbon footprint; however, these vehicles us about $800,000 a year in fuel, and support operations do contribute to local air quality issues and represent with cleaner, quieter and more reliable equipment. opportunities for innovation, enhanced employee safety, and reduced environmental compliance risk. New maintenance software helps Alaska Airlines That’s why we’re making the switch to electric vehicles track and monitor detailed GSE inventory to evaluate wherever operationally feasible. improvements in efficiency, as well as to determine which equipment is costing more to repair and why. The 2020 Goal 30% increase Increase the percentage of Alaska’s electric vehicles to 30% system-wide. Progress In 2013, Alaska Air Group launched the Seattle eGSE Project with the aim of replacing more than 200 fuelburning ground support vehicles with their electric equivalents over a period of two years. We estimate this Alaska Airlines Annual eGSE Increases 2009 9% 2010 9% 2011 9% % eGSE of Powered Fleet software is also used to calculate the percentage of our electric equipment, establish replacement plans, and 2012 10% identify surplus that can be relocated to meet needs. 2013 This year, we also implemented a new centralized GSE 22% fuel tracking system, helping us to accurately track all types of GSE fuel (gasoline, diesel, propane, and The fleet composition of Horizon Air’s motorized vehicles electric) consumption and achieve our 2012 goal. is tracked independently by company division. The Horizon eGSE composition was previously reported at 65%. We Alaska Airlines has increased the number of eGSE by now realize that this number was incomplete and did not 12% since our last reporting period. In 2013, we reached account for the vehicles assigned to our maintenance 22% eGSE, exceeding our stated goal of 20%. division. The current motorized GSE fleet composition across all divisions consists of 60% electric and 40% fuel- 24 introduction environment environment society economy appendix powered equipment. In 2014, we will be evaluating new inventory systems that will allow us to centrally track Horizon’s GSE and provide accurate calculations of our eGSE composition in the future. Challenges It is not feasible to operate eGSE in all locations. Electric vehicles cannot operate in Arctic extremes, not all airports have the electrical infrastructure to support charging stations, and there are not electric equivalents available for every type of vehicle we operate. In 2014, a more robust and disciplined tracking system will be established, which will strengthen our progress measurement for Horizon’s GSE fleet. We will also evaluate opportunities for an eGSE fleet in Anchorage. Harnessing the Power of the Sun Solar-powered ramps are in use at airports in Seattle and San Jose. The first of their kind, these ramps enable passengers to board and deplane through the rear door of the aircraft while others simultaneously do so from the front, saving passengers time and gaining Alaska efficiencies in our aircraft turnaround process. 25 introduction environment environment society economy appendix Energy In Our Facilities The performance of our buildings identify opportunities for improvement and help us small piece of our overall environmental impact when manage the overall energy performance in buildings compared to aircraft emissions. However, these facilities we control. We have started incorporating sustainability still represent opportunities to conserve resources, criteria into our facilities maintenance and planning, reduce GHG emissions, and reduce the operational and periodically review energy performance data for costs associated with energy consumption. facilities equipment and systems. 2020 Goal reduce Energy consumption data is being used to develop our energy consumption in facilities where Alaska Air Group is responsible for facilities maintenance Progress Energy Intensity of Buildings 146 140 141 132 internal scorecards that help us track and analyze energy use by type and geographic region, which helps us monitor monthly performance. Data will also be used for project planning, tenant education and 2008 2009 2010 2011 2012 2013 collaboration opportunities. In 2014, we will complete several energy audits and Total Energy Consumption4 To help us more effectively plan our facilities maintenance develop a plan for buildings with the worst energy 2012 2013 efforts and reduce our operating expenses, we’re consumption rates. Structures that need improvements 202M 198M developing and implementing processes that will 143 136 kBtu/sf The energy consumed by our buildings is a relatively will be renovated to improve energy efficiency and reduce emissions and operating costs. kBtu/year kBtu/year 4 As of 1/1/2013 the new numbers reflect a 4% decrease in intensity from baseline 26 introduction environment environment society economy appendix Challenges It is difficult to regulate or measure progress in shared This error also impacted our ability to accurately buildings since our energy consumption is not always measure our progress toward our previously stated metered independently of the rest of the airport. energy conservation goal. While we have corrected Without a way to see the impacts of our consumption, these data errors, we’re re-evaluating our previous goal it can be challenging to modify operational habits to and will develop more consistent systems for capturing, improve conservation. analyzing, improving, and reporting our facility energy use. Our revised numeric goal will be published in our In buildings we do control, accuracy is important; we next report. continually look for better ways to monitor and track our energy usage. An error was recently discovered in the square footage data used to calculate our energy consumption and performance. Although our methodology, scope and boundary remain unchanged, this resulted in a change in our energy data due to square footage updates. 27 introduction environment environment society economy appendix Waste & Recycling Looking at our impact from the ground to the skies The airline industry generates and manages a great deal of waste. Although our inflight operations are the largest contributor, our waste stream is also impacted by operations in our offices, maintenance facilities, and in the airports where we fly. We approach waste & recycling solutions in two categories: Inflight At Our Facilities 28 environment environment introduction economy society appendix Waste & Recycling: Inflight Recycling is our service standard The largest contributor to our waste stream is inflight waste from food and beverage services. Added up over Progress Seven percent of all recyclables are presently being Each airline audits more than 30 flights a year to landfilled. This is partially due to unfamiliarity with recycling time, the amount is significant — at just under a quarter measure, track, and evaluate our waste stream. We procedures, the difficulties arising from having to separate pound per passenger on every flight, we generated over provide feedback to our flight crews and solicit ideas for trash and recyclables using a two-bag collection system, 3,900 tons of waste in 2013. improvement. and operational events that interrupt our recycling efforts. To counteract this environmental impact, recycling is a Our waste stream currently includes 50% non- Horizon Air currently composts over 14 tons of coffee service standard at both Alaska Airlines and Horizon Air, recoverable materials, and we’re working to adjust our grounds each year; in 2014, we’ll evaluate ways to integrate regardless of where the flight is headed. We’re proud of inflight procurement practices to decrease this quantity. composting at Alaska Airlines, as well. our award-winning inflight recycling programs and the progress we’ve made in the past two years. 2020 Goal Where we are today 70% reduction 52% Reduction per passenger since 2010 Alaska Airlines Horizon Air Goal for 2013: Goal for 2013: recyclable collection rate recyclable collection rate Success: Success:6 70% 2010 Reduce all inflight waste sent to landfill5 by 70% per passenger, over a 2010 baseline. Previous Goals & Successes 2011 2012 2013 .33lbs .21lbs .18lbs .16lbs 5 Alaska Airlines and Horizon Air combined 6 While we would like to reach 100%, safety and operational considerations take precedence and it is not always feasible to be thorough with safety in mind. 77% 90% 93% 29 introduction environment environment society economy appendix Challenges The biggest challenge we encounter is with airports and municipalities that do not have the infrastructure for a successful commingled recycling program. In these locations, we must transport recyclables to a hub location. While in many of our Alaska Airlines locations we have resolved this by contracting with a single waste disposal company to collect commingled recyclables, it remains a challenge at Horizon Air where it is managed by the individual stations. Additionally, government regulations require incinerating all international waste — including recyclables — and many locations have food residue restrictions set by recycling companies that limit what they’re able to take. New Locally Sourced Coffee Cups In 2013, Alaska Airlines and Horizon Air introduced new coffee cups that are manufactured locally from 50% recycled water bottles and recycled after use. By using recycled cups, we keep 40,000 plastic bottles from going into landfills each year and prevent at least 250 trees from being cut down to make paper coffee cup equivalents. 30 introduction environment environment society economy appendix Waste & Recycling: Facilities Opportunities for our ground-based employees While the vast majority of our waste is generated inflight, ever. The program is expected to save the company waste management and recycling within our facilities more than $60,000 a year, and we’re now evaluating the is still important to our business. Not only does it implementation of recycling programs in other large- save money, it also helps employees make a personal scale buildings in Seattle, Portland, and Anchorage. connection and contribute to our sustainability efforts. 2020 Goal 100% Challenges The main challenge is that our capacity to roll out programs in rural facilities is sometimes limited by a of ground-based facilities have lack of infrastructure or recycling services within those recycling programs by 2020 communities. where operationally feasible. In other facilities, a lack of corporate or divisional Progress In 2012, our Seattle offices kicked off a new employeeled recycling program. Volunteers helped implement the program and have made it easier to recycle than oversight makes it a challenge to raise awareness and instill recycling habits when new programs are introduced. Good communication and overall awareness of our desire to build sustainability into our brand have helped in this ongoing process. 31 introduction environment environment society economy appendix Materials & Supplies What goes in must come out: upstream strategies for minimizing consumption of resources Another approach to waste management is through source reduction — eliminating waste before it’s created. Choosing materials and supplies that are designed to minimize waste reduces the demand for unsustainable resources. This approach also gives us an opportunity to work closer with our vendors and suppliers, signaling our intention to move in a more sustainable direction through the questions we ask and the orders we place. Choosing where to begin can be a challenge. We know it can’t all be done at once, so we’re focusing current efforts on paper and inflight service materials. We approach materials consumption in two categories: Inflight Supplies Paper 32 introduction environment environment society economy appendix materials & supplies: Inflight Supplies Exploring sustainable product options Airlines use millions of disposable items onboard flights every year — Alaska Airlines alone uses over 36 million cold cups and 54 million napkins. It’s important for us to explore sustainable products simply because our consumption is so great. 2020 Goal 100% of our inflight consumable serviceware is sustainably sourced.7 Progress Since our last report, we’ve been working with our sourcing vendor to identify options that meet our sustainability and operational needs, and have been working with local recycling companies to ensure the materials we send are acceptable. In 2013, we introduced new recycled hot cups and placed 100% recycled content paper personal hygiene 7 As measured by percentage of total inflight serviceware that meets at least one sustainability criterion: reusable, easily recycled, manufactured from recycled content, and/or sourced from certified sustainably managed forests. products on all Alaska Airlines flights. These changes will be introduced on Horizon flights in 2014. We’re also in the process of eliminating the last of our polystyrene coolers, moving more of our disposable foil items to sustainable options, and identifying ways to decrease the amount of disposable materials on our flights. Challenges From stir sticks and pretzels to the garbage bags they end up in, we use a huge variety of materials during inflight services, and it can be difficult to obtain sourcing data8 for each and every item. Although this makes quantification and establishing a baseline problematic, local managers and suppliers have been very helpful in providing any information they have. It will be some time before we reach our goals, but we’ve started the conversations and set our expectations with suppliers. Although our data will need to be adjusted as we get better at identifying the sustainability criteria behind the materials we use, for now we’ve established an estimated baseline to help us measure progress and identify areas of opportunity and improvement. Sustainability in the Supply Chain In 2013, we began pilot testing the implementation of a vendor scorecard, which includes environmental sustainability criteria in waste, sustainable sourcing, and energy use. We request information regarding sustainability efforts from all our vendors in our standard RFPs; in certain cases, specific requirements must be met, and vendors that do not meet the criteria are not considered. For example, as part of our food and beverage criteria, vendors must commit to recycling 100%. 8 Sourcing Data: Product composition, % recycled content, life-cycle impacts, etc. 33 introduction environment environment economy society appendix materials & supplies: Paper Decreasing waste, improving operations, and saving money Paper epitomizes inefficiency and hidden expenses. Not only are environmental costs associated with harvesting and processing raw materials, but the associated printing, storage, security, and disposal make paper costly, as well. These are just some of the reasons we’re moving toward a paperless industry as we introduce ticketless travel, mobile boarding passes, electronic forms, paperless flight decks, iPads® for mechanics, and electronic records. By finding ways to eliminate paper, we get the job done quicker, cheaper, and with less waste. 2020 Goal 50% reduction of internal consumption of office & operational paper by weight, over a 2012 baseline. Progress In the past, we pioneered the progress of the paperless airline industry by becoming the first U.S. airlines to allow travel bookings via the Internet, utilize check-in kiosks at the airport, and introduce Web-based passenger check-in. In 2013, our total office paper consumption decreased by over 14% while our operational paper use increased by 4%, for a net decrease of 5% for all paper. In 2013, we developed a cross-company paper reduction task force. Bringing together a team from our sustainability and LEAN groups, Supply Chain Management and IT departments, our job involved defining which paper uses to explore, establishing a baseline, and evaluating processes to identify opportunities for reduction. Office & Operational Paper Use 9 800K Operational: 406K lbs 600K Operational: 421K lbs 400K Office: 200K 387K lbs Office: 330K lbs 0 2012 Paperless Flight Deck As part of an ongoing effort to use technology to enhance flight safety, improve efficiency and protect the environment, Alaska and Horizon have issued iPad® tablets to pilots, replacing the paper flight manuals pilots are required to carry. Alaska was the first major domestic airline to take this step, replacing up to 25 pounds of weight per flight, reducing fuel requirements, and saving approximately 2.4 million pieces of paper a year. 2013 9 For the purposes of our baseline, externally printed and distributed marketing and HR communications are not included due to the difficulty of obtaining the data from a large network of print providers. 34 introduction environment environment society economy appendix Looking Ahead Other projects we’ll undertake include: • Replace all flight crew and maintenance paperwork with tablet technology; • Develop a corporate printer strategy; • Evaluate our electronic document management options; • Develop and finalize a system for electronic signatures; and • Replace 10% of existing paper forms with those in electronic format. Challenges Our company uses just under 1 ton of paper daily — nearly 70 million pieces of paper every year. Paper is used for internal and external operational, general office, and communication purposes, for bag tags, ticket stock, envelopes, office and operational print jobs, annual reports, manuals, brochures, and posters. Although we have transitioned to paperless methods for a variety of programs, there are Trees (and Accountants) Rejoice! Our Fleet Service Department is replacing all aircraft toilet tissue, facial tissue, and paper towels with 100% recycled paper products. Since our passengers use over 450,000 pounds of these hygiene-related paper products annually, the switch to all recycled content is expected to save over 665 tons of trees each and every year. Alaska’s accountants will rejoice, as well; by switching to recycled products, we’ll also save over $80,000 a year. still ample opportunities for improvement across the company. 35 Overview 38 Passenger & Employee Safety 40 Employee Attraction & Engagement 43 Diversity & Equal Opportunity 45 Supplier Labor Practices 47 Corporate Giving & Community Support 48 Section 3: Society Embracing Corporate Responsibility environment introduction society society economy appendix Overview People are at the heart of our business People are our most important assets. The future of Alaska Air Group depends on the strength and success of our employees, the satisfaction of our customers, and the positive relationships we build with the communities we serve. Because our success depends so highly on the success of our people, this year we have focused our attention on the following areas: Priorities and Commitments: Passenger & Employee Safety Diversity & Equal Opportunity Supplier Labor Practices Employee Attraction & Engagement Corporate Giving & Community Support 38 environment introduction economy society society appendix Overview: Achievement Highlights 1 Passenger & Employee Safety 4 We are: 50% toward full implementation of our new Safety Management System 2 Alaska and Horizon have each received the FAA Diamond Award for Maintenance Training Excellence 12 times in the past 14 years this is a: our employee Engagement 79% in 2013 Employee retention rates are consistently over: 13% improvement since 2011 90% Diversity & Equal Opportunity we are committed to having a Diverse & inclusive culture Board of Directors 36% People of Color 3 Employee Attraction & Engagement 27% Women 100% of our employees go through diversity training 5 100+ MAJOR SUPPLIERS Every 1 job at Alaska Air Group 1,300 community organizations #1 And Donated: $15.5M inor cash in-kind And invest more than: we employ: Corporate Giving & Community Support we supported over: Supplier Labor Practices 10,000+ MINOR SUPPLIERS = $600M in local economies 2.5 jobs in the communities we serve Alaska Air Group is the only major U.S. commercial airline that has a Vender Code of Conduct to ensure that suppliers treat their staff the way we do. since 2011 We help train the leaders of tomorrow: Through targeted giving and mentorship, we expose youths to science, technology, engineering and math careers. 39 introduction environment society society economy appendix Passenger & Employee Safety Our No. 1 priority The safety of our passengers and employees overrides any other consideration, and we are committed to continuously integrating a positive safety culture into every aspect of our business. We aim to comply with all external safety standards and procedures, and have developed rigorous internal policies and practices to ensure the highest possible level of safety for our employees, our customers, and our communities. Promoting a Culture of Safety 40 introduction environment society society economy appendix Passenger & Employee Safety: Promoting a Culture of Safety For every customer and every employee, on every flight, every day We are determined to ensure the safety and well-being of our customers and employees, so a safety culture is integrated across all aspects of our organization. 2020 Goals Achieve the highest possible level of safety for every employee, every customer, and every flight, every day, by: 20% Progress In 2013, both Alaska and Horizon completed the second implementation phase of a Safety Management System (SMS), a structured process to help ensure safety risks are managed and to help us identify risks before incidents occur. Risk level is assessed on a scale of 1 to 5, with higher increase in the employee safety risk values assigned to events that are higher in severity reporting rate and more likely to occur. We incentivize a safety culture over a 2012 baseline for all Alaska Air Group at our airlines by linking a percentage of our employee employees. bonus program (Pay for Performance) to Risk Level 3 Incentive Drive continuous safety improvement & accountability through an employee bonus program. and higher events. As a result, safety awareness has already improved; Risk Level 3+ events have been reduced by 83% since year-end 2011, and we have already seen a 24% increase in the number of safety reports submitted quarterly per employee. To meet our 41 environment introduction society society economy appendix 2020 goal, however, we’ll need to sustain our increased reporting rate. An increase in reports means that we are creating a reporting culture where people feel free (even obligated) to point out concerns. Challenges Shifting workplace safety culture can be a challenge to implement on such a broad level. Our best efforts are spent in proactively identifying operational and workplace risks, and mitigating them before they lead to accidents. As employee reporting is essential to identify those risks, we try to foster a culture in which all employees feel empowered and encouraged to report safety concerns as they arise. Operational Compliance Safety Reports Submitted per employee in Q1 2012 – Q3 2013 0.4 24% 0.3 increase 0.2 in the number of safety reports submitted quarterly per employee 0.1 Strict adherence to governmental regulations and company policies and procedures is crucial to safety and compliance. Federal Aviation Regulations govern how we operate and maintain our aircraft and conduct our ground operations. Department of Homeland Security regulations govern the security of our passengers, employees, and aircraft. Department of Transportation regulations govern airline consumer protection requirements, such as how we handle delayed, canceled or overbooked flights, and how we accommodate passengers with disabilities. These regulations, along with many more, affect nearly every employee at Alaska Air Group. 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 42 introduction environment economy society society appendix Employee Attraction & Engagement Encouraging candid feedback Each year we ask our workforce to participate in an employee survey to measure engagement and other Progress Engagement results in 2013 showed a significant aspects of employment. We encourage candid feedback improvement over our survey in 2011. 82% of Alaska and we act on it. Air employees and 78% of Horizon Air employees participated in the survey. 2020 Goals Increase internal and external recognition of Alaska and Horizon as great places to build a career by: 80%+ employee engagement score10 achieved for both Alaska and Horizon (with no less than 75% per division). Employee Engagement Survey Scores: 2011 66% Engagement 2013 79% Engagement Challenges Our people are personally invested in this company recognition and that shows in our results. That said, this is no time as a great place to work to relax. We will continue the hard work that got us from at least one national organization. great results and find ways to improve further. 10 As measured by the Kenexa Engagement Index Flight Path Previous results showed a lack of understanding and alignment around our corporate strategy. As a result, we developed a one-day seminar — called Flight Path — to provide interactive learning opportunities regarding our company’s strategic goals and where employees fit into the larger picture. In 2010, we created a goal of getting 100% of our employees through Flight Path. We have nearly accomplished that goal; 99% of active Alaska and Horizon employees have now participated in the seminar. In honor of the commitment to attend and participate in Flight Path, we’ve dedicated two airplanes that display employee’s signatures and the message “Employee Powered.” 43 introduction environment society society economy appendix Employee Attraction & Engagement: Labor Relations Working together for long-term success Our dedicated and engaged employees set us apart, and we want them to have long and successful careers. Progress In ideal circumstances we are able to reach agreement We work together with our people and their unions to with our unions before contracts become amendable ensure the company remains successful. for renewal; something we have been more successful Many of Our Employees are Union Members: with over the past two years. Three of the last four 83% amendable dates. We’ve also been able to reach long- Alaska Airlines 49% Horizon Airlines Alaska Air Group makes an effort to understand and contracts reached agreement by or very close to their term agreements, which provide more certainty and stability for both employees and the companies – most of our recent contract terms have been five-year terms. communicate with employees directly as well as through their elected union leaders. At Alaska during the past 28 months, our pilots and mechanics agreed to five-year contracts and our Alaska Airlines Guiding Principles ramp agents agreed to a six-year contract. A five-year 1 An emphasis on working cooperatively to solve problems service agents is pending ratification. Our flight 2 A focus on flexibility and high productivity to maintain a strong business model 3 agreement with our clerical, office and passenger attendants rejected a proposed contract and we remain in active mediation with them. At Horizon, pilots agreed to a six-year contract, flight Targeting pay and benefits in the upper attendants signed a five-year contract and our Canadian tier of the industry. station employees ratified a three-year pact. 44 introduction environment society society economy appendix Diversity & Equal Opportunity Promoting communication and understanding Talent, creativity, and passion are possessed by 2020 Goals everyone. By stimulating a culture that values the unique Our commitment to attract, retain and advance diverse perspectives and contributions of every employee, we employees is measured by progress toward two goals: attract and retain a valuable workforce that contributes to the company’s success. increase the promotion rate of women “Fostering a culture of inclusion means embracing our & people of color differences — this includes the color of a person’s skin, to match or exceed those for majority employees where they came from or their gender. It also includes and increase our Executive Committee to 1/3 or diversity of thought, diversity of perspective and a greater women or people of color. willingness to spark new ideas.” — Laura Fowler, Managing Director of Diversity & Recruiting 10% hiring rate of veterans and ensure retention and advancement rates meet or exceed non-veteran employees. 45 introduction environment Progress We believe that diverse teams create stronger and more creative solutions. As with many in the business world, the diversity of our employees thins out nearer the top of our organization. We are dedicated to moving the needle on diversity, including at the top levels of leadership, as reflected in our 2020 goals. We are committed to attract, develop, retain and advance diverse employees by shifting our culture to one that welcomes and supports varying styles and backgrounds. Along with this culture shift, we are making a concerted effort to hire and advance diverse employees at all levels. Our Board of Directors is an excellent example of diversity, and we are committed to building a strong and diverse team throughout the ranks at Alaska and Horizon. Challenges Promoting diversity involves more than acknowledging differences, and being diverse alone does not by itself promote an inclusive culture. We intend to be transparent and persistent in encouraging communication and understanding about the business and ethical necessities of a more diverse and inclusive workforce. 11 In 2009, the U. S. Government redefined what it meant to be a veteran. Many who were previously considered veterans no longer qualified under the new definition. Our data is aligned with the new definition, beginning in 2010. economy society society appendix Employee Demographics 13,177 Employees by age Employees 54% 20% women People of COlor 10 Years 18-30 30-50 50+ 58.5% of our employees have been with the company for 10 or more years. Employing Military Veterans Often well-educated, motivated and highly trained, the unemployment rate of post-9/11 military veterans11 remains high. With a wide range of technical and professional expertise, they’re able to contribute to specialized civilian occupations in information technology, business management, piloting, procurement, operations and customer service. Alaska Air Group embraces veterans as respected and valued additions to our workforce, and we’ll continue to offer support through the Military Employee Resource Group. Currently, 6.5% of Alaska Airlines and Horizon Air employees are military veterans or are currently serving in the Guard and Reserve. Of our 1,137 newly hired employees, 6% are veterans. Military Apprenticeships Our Military Apprentice Program is designed to help transitioning soldiers gain experience with a civilian employer while simultaneously exposing hiring managers to the unique skills and experiences a military veteran can bring. The program was so successful in its pilot year that each division hosting a three-month apprentice extended the opportunity for an additional three months out of their own budgets. Since then, the program has been modified and apprenticeship opportunities now last six months. 46 introduction environment society society economy appendix Supplier Labor Practices Embedding ethical labor practices into our supply chain Alaska Air Group believes our business partners should Progress This is the first known adoption of such a code of Air Group’s Airport Vendor Code of Labor Standards vendor conduct by a major U.S. airline. We have When the Washington State Department of Labor and outlines our minimum expectations for airport vendors received total compliance from our vendors and have Industries issued several citations to ground service regarding treatment of employees. The code explains not identified any negative impacts from this program. vendors used by Alaska at Sea-Tac Airport regarding the legal requirements in plain language, explains to safety and training issues in 2013, we recognized there employees their rights, and informs them that Air Group was not naturally embedded governance over vendor endorses these rights even though they’re employed compliance with employment-related regulations. This by another company. The code is incorporated into led to developing the Alaska Air Group Airport Vendor vendor agreements, and allows the termination of Code of Labor Standards, which requires vendors to these agreements in cases of serious or repeated provide safe, humane, and legally compliant working non-compliance. We’re developing a monitoring and conditions for employees working in the service of auditing program to track vendor compliance, and Alaska Airlines. documenting resolution for any vendors not fully- 2020 Goal accepting. be held to the same standards we set for ourselves. Vendor Code of Conduct 100% of covered vendors will have incorporated the Alaska Air Group Airport Vendor Code of Labor Standards into contracts 47 introduction environment society society economy appendix Corporate Giving & Community Support Giving back & sharing our successes Our company embraces the culture of the communities where we fly, and we routinely participate in events such as charity drives and educational support campaigns. We see ourselves as a part of these communities, which is why we feel it’s our responsibility to help when they’re in need or suffering from disasters by donating our time, money, and talents. Our Priorities: Corporate, Employee & Customer Philanthropic Efforts Educational Support Economic Opportunities for the Sea-Tac Workforce 48 environment introduction society society economy appendix Corporate Giving & Community Support: Corporate, Employee & Customer Philanthropic Efforts Supporting a brighter future Our charitable efforts encompass the passions of our employees and customers, and contribute to the overall well-being of our communities. Ways we give back to our communities include: Alaska Air Group has the opportunity to donate inkind travel to nonprofit organizations for fundraising efforts or to help reduce staff travel costs. In 2013, we supported more than 1,300 different organizations. 1 Cash and in-kind donations: 2012 2013 Total: Total: $7,884,067 $7,633,182 In-Kind Donations: In-Kind Donations: $6,245,951 $6,518,910 Cash Donations: Cash Donations: $1,638,116 $1,114,272 12 Capped at $1,000 per employee, with an overall program cap of $200,000. 4 Each year, we beat our previous record filling virtual cargo planes with food to feed communities in need. In 2012, we collected contributions of $44,000 and 13,000 pounds of food, packing nine virtual cargo planes. In 2013, employees raised more than $54,000 and collected more than 12,000 pounds of food, setting another record and packing over 11 planes. Support for Local Charities We donate cash and in-kind transportation to a variety of non-profit organizations that support the communities where we fly, such as MakeA-Wish Foundation, The Nature Conservancy, Angel Flight West, and Special Olympics. 2 Matching Gifts Matching employee donations dollar for dollar12, this program benefitted 520 unique organizations in 2013. 3 Dollars for Doers For every hour one of our employees volunteers at qualifying nonprofit organizations, a charity of their choice is paid $1013. In 2012, Air Group paid $104,060 to selected nonprofit organizations, and in 2013 our payout reached $90,323. 13 Capped at $1,000 per employee, with an overall program cap of $200,000. Pack the Plane 5 Disaster Relief Through corporate donations, employee matched gifts, and generous Mileage Plan™ member donations, we’ve been able to provide aid for several recent disasters. Our Charity Miles program provided mileage donations to send medical and relief teams to areas of need, including flood areas in Alaska, Colorado and Chicago, and to aid typhoon relief efforts in the Philippines. 49 environment introduction society society economy appendix Challenges It is difficult to define the impacts of our philanthropic efforts. Going forward, we intend to enhance our giving strategy so we’re able to capture and track data on the progress we’re making. With so many worthwhile causes and limitless opportunities to support those in need, it’s also challenging to choose which efforts to support. We are refocusing our efforts to have greater impact. Our focus will be Youth/ Education; and Medical Research. We’ve decided to concentrate on three main areas: Youth Education Medical Services 50 environment introduction society society economy appendix Corporate Giving & Community Support: Educational Support Improving exposure to STEM education Alaska Air Group is focused on ways to meaningfully expose youths to science, technology, engineering and math (STEM)14 careers through targeted giving, We provide ongoing support to exciting programs, including: mentorship, and other programs. By developing our educational giving strategy and increasing our focus on 1 Aviation High School youth and education, we hope to improve educational Seattle’s Raisbeck Aviation High School (RAHS) outcomes is the nation’s first public aviation-themed college by developing resources, mentors, internships, education and leadership support. preparatory school. All subjects are taught in 2020 Goal improve the context of aviation with an emphasis on educational & economic outcomes for youths in key Alaska Air Group locations. Progress Although we’ve shaped long-term strategies to promote education and foster career advancement that will lead to economic improvement in our communities, we currently do not have a well-defined method to measure the success of our efforts. In 2014, we will develop and STEM subjects. Previously operating out of two temporary facilities, the school was limited in its ability to provide applicable learning experiences — until now. In 2013, Alaska Airlines and other major industry corporations donated enough money for RAHS to open a permanent facility on the grounds of Seattle’s Museum of Flight. In its new location, the school is close to aviation businesses that serve as neighbors, advisers and resources. define the metrics we will use to measure our progress. 14 Science, Technology, Engineering and Mathematics 51 introduction environment 2 Project Amelia society society economy appendix 3 Pledge It, Prove It, Take Flight Alaska Airlines made a public committment to Alaska Airlines hosted over 600 students from helping young girls pursue their dreams in aviation 21 high school and educational programs at the through a $75,000 contribution that helped a company’s Hangar facility in Seattle. The program replica of Amelia Earhart’s 1935 Lockheed 10-E included Alaska and Horizon employees that Electra become part of the Museum of Flight’s shared their experiences with a special focus permanent collection in 2013. The vintage on some exciting careers related to Science, aircraft is part of Project Amelia, a program that Technology, Engineering and Math. Alaska’s brand aims to inspire young girls interested in science, ambassador and Chief Football Officer Russell technology, engineering and math (STEM) and Wilson addressed the students directly sharing his marks a unique opportunity for the Women’s experiences with balancing football and education Interactive Network Group (WING) to connect through hard work, dedication and determination. women in STEM careers at Alaska with those The program ended in a challenge for students to aspiring youth. pursue their dreams and long term goals. A tour of one of Alaska Airlines Boeing 737s followed the event where students were able to walk around, board and see every part of the aircraft. Three of the 21 high schools won the opportunity to return to Alaska as guests aboard a delivery flight of a brand new aircraft in 2014. 52 introduction environment society society economy appendix Corporate Giving & Community Support: Economic Opportunities for the Sea-Tac Workforce Skills training for our community Alaska Air Group believes in fair pay and benefits for all workers, and we respect every worker and the job 2020 Goal increase they do. We strive to work closely with our labor unions and business partners on pay rates and benefits that reflect the job market. We also recognize that income inequality is a serious problem across the country. Proposition 1, targeted at the city of Sea-Tac, pushed this issue to the forefront locally. While enhanced pay and benefits are one component of a possible solution, we believe from a longer-term perspective that it’s important for entry-level airport workers to have access to education, training, and opportunities for advancement to help them establish a career in aviation. Proposition 1 did not address these issues. In the year ahead, we’re committed to working with our business partners and other airport community stakeholders to find solutions that better address the needs of entry-level workers and the Challenges Given the severe economic pressures that existed economic opportunities during the mid-2000s, Air Group made many difficult & enhance job skills decisions to help the company financially survive. for workers in the Sea-Tac area. One of those difficult decisions was to outsource the ramp function at Sea-Tac Airport in 2005. Today, we Progress We strive to work closely with our business partners on pay rates that reflect the job market. In October 2013, we worked with Menzies Aviation and mutually agreed to raise starting wages for ramp agents by 14%, with additional raises after six months, one year and again at the end of two years. In 2014, we will gather information to help us define how we’ll contribute to finding solutions to improve training and advancement opportunities for entry-level can see this inadvertently eliminated a career pathway opportunity for ramp workers. When we employed our own ramp agents, a more natural upward progression within the company existed for them. In upcoming years, we want to help create new advancement opportunities to help entry-level workers move ahead in their aviation careers. Did You Know? 58.5% of our employees have been with the company for 10 or more years. workers. ramifications caused by income inequality. 53 Overview 56 Economic Performance 58 Hassle-Free Flying 62 Section 4: Economy Advancing Economic Stability introduction environment economy economy society appendix Overview We are celebrating the most successful year in our 81-year history Resourcefulness and innovation are at the core of how we run our business. A sustainable business model demands these qualities and they’ve helped us identify Our efforts have placed us in a strong financial position that allows us to: new ways of operating efficiently, lowering costs, and recognizing valuable investments in our people, business, and communities. We’re always looking for ways to improve our financial performance while continuing to provide value to our customers. As we transition toward a more sustainable business Grow Our Network Support the Local Economy Develop Cutting-Edge Ways to Keep Our Customers Happy model, the direct and indirect financial benefits are becoming clear. 56 environment introduction economy economy society appendix Overview: Achievement Highlights 1 Our Financial Position 3 we achieved a: Return On Invested Capital in 2013, allowing us to balance our investments between customers, employees and investors. Supporting the Local Economy in WA state, we support: 13.6% 6,336 & employees 15,840 indirect jobs lowering our operating expenses allows us to: generating: $407.8M in wages that has helped to boost WA State’s economy our employees received: Keep fares low Deliver reliable value to customers Offer employees better incentive packages Provide above average returns to our shareholders our stock is reaching an all-time high with: $383M* in profit achieved in 2013 $78.53 per share on Nov. 27, 2013 1+ month’s pay Generous healthcare benefits Fully-funded pensions in bonuses on average over the past five years — with a record total of $105M distributed in 2013 21M shares of Alaska Airlines stock bought back since 2007 *Non-GAAP 4 Cutting-edge Ways to Keep Customers Happy For six straight years, alaska airlines ranked: #1 2 Growing Our Network for Customer Satisfaction Among Traditional Network Carriers in J.D. Power North America Airline Satisfaction Study. we keep our customers happy by delivering results: we are positioning ourselves for growth: 12 new aircraft were added to our fleet in 2013 67 new aircraft are on order to ensure we meet demand and maintain quality 15 new markets were added in 2013 1.2M downloads of our Alaska Airlines phone app, which received 4.5 stars or higher on both iPhone® and Android platforms 95% of the time we deliver customers’ bags within 20 minutes of the aircraft parking All seats on our new aircraft come with dual 110-volt and USB power outlets 57 introduction environment society economy economy appendix Economic Performance Beyond the bottom line Whether we’re creating jobs, spending money that helps the economy, providing corporate philanthropy or other activities, we know we can be a positive driver of the health of the communities where we operate. By providing our employees with good jobs and meaningful work, we’re confident we can continue to grow responsibly and make decisions that are in the best interests of our employees, customers, and shareholders. Finances for a healthy economy Sustainability: The Business Case Supporting the Regional Economy A Stable Workforce 58 introduction environment economy economy society appendix Economic Performance: Sustainability: The Business Case Sustainability efforts are a part of our financial success Alaska Air Group has put in place an organizational and governance structure that helps us make decisions with Progress Did You Know? Since establishing our balanced scorecard approach to sustainability in mind. These efforts have been financially customers, employees and investors in 2003, Alaska advantageous; excluding fuel costs, we’ve driven down Air Group has exceeded our return goals for the past our mainline operating expenses to 7.54 cents per four years and achieved an ROIC of 13.6% in 2013. available seat mile (ASM). Ongoing resource savings will allow us to continue to provide top-notch customer service and an exceptional flying experience. 2020 Goal PROVIDE This performance has led to: $78.53 per share value to our customers $383m profit Our stock reaches an all-time high on Nov. 27, 2013. in 2013, the best year in our history. $478M Alaska Airlines shares bought back since 2007. This will be measured by maintaining a 10-year historical average ROIC of greater than 10% AND our customer’s perception of value received. Our numerous fuel-saving innovations have also proven to be intelligent investments, contributing directly to our financial success and supporting other initiatives that benefit employees and shareholders. above average returns for our owners, while providing consistent While no funding was required, we contributed $620 million to our pensions over the past five years and reached fully funded status in 2013. Our first quarterly dividend since 1992, beginning in Q3 2013. $105M in employee bonuses This is an average of more than one month’s pay for every employee. With the most fuel-efficient fleet in the industry, we have reduced our fuel use per revenue passenger mile by 31% since 2004, and our eGSE program will save another $800,000 in fuel costs annually. We have 67 firm aircraft orders to replace our aging fleet and ensure we can grow 4-8%. We have 71 options, should we earn the right to grow more. 59 environment introduction By lowering unit costs, offering competitive fares and society We have maintained a strong financial position customers and to our business. And, if we continue despite facing many uncertainties in recent years, but to achieve our ROIC goal and perform well overall, we expensive jet fuel remains an enduring challenge. By will strengthen our ability to remain an independent far the largest cost in our operations, fuel prices have company. increased 320% since 2002. With each $1 increase per ROIC 10.7% 11.7% 12.7% pretax profit, fuel costs have affected us tremendously. While we’ve had great success in driving down our operating costs independent of fuel, we will not cut costs at the expense of safety or our customer 6.0% 6.1% barrel of oil representing an $11 million decrease to our 13.6% 7.9% 5.3% appendix Challenges growing our network, we continue to add value for our Annual Return on Invested Capital15 economy economy experience. Providing safe, reliable, great service and 3.5% low fares is a balancing act. We’re not aiming simply to be the cheapest airline — we want every decision we ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 15 adjusted for hedge mark-to-market and unusual items make to provide value to our customers. 60 environment introduction economy economy society appendix Economic Performance: Supporting the Regional Economy Our success affects the communities and economies we fly At Alaska Air Group we want to be more intentional in managing our positive impacts on local and regional economies. We know that as a major airline we have Based on year-end figures from 2013: $407.8M an estimated in wages paying jobs and influence the quality of thousands of paid to Washingtonbased employees contributed in direct output to the state economy $1.26billion $5.58billion in 2012, Alaska Air Group commissioned an analysis of the company’s overall economic impact on Washington state (the location of our largest hub). Our Economic Impact on Washington State 6,336 employees directly employed in WA: 5,301 at Alaska Airlines and 1,035 at Horizon Air 15,840 jobs (indirect and induced jobs16) supported by Alaska Air Group 16 The jobs generated by the expenditure of visitors to a region, including both suppliers to Alaska Air Group and the jobs created by wages spent. contributed in total labor income, including indirect and induced effects on labor income17 Every 1 job at Alaska Air Group generates an additional 2.5 jobs in Washington State. $2.28billion the opportunity to directly provide thousands of goodothers indirectly. To get a clear picture of these impacts Did You Know? generated in total economic output in the state economy Increased the state economy Increased labor income overall by $2.44 for every $1 increase in our own total economic output in Washington State by 55 cents for every $1 increase in our own output 17 Income available expenditure back into the economy. Direct Economic Impacts18 2012 2013 $4.65 billion $4.96 billion Excluding Fuel $2.67 billion $2.85 billion Economic Fuel $1.42 billion $1.48 billion Income Taxes Paid $78 million $149 million State Property Taxes $26 million $30 million Employee Wages & Benefits $1.03 billion $1.08 billion Dividends — $28 million Interest payments $46 million $35 million Revenue Operating Costs 18 Impacts are considered significant since they are under direct control or payment by Alaska Air Group 61 introduction environment society economy economy appendix Hassle-Free Flying Innovation toward effortlessness Our success ultimately depends on the satisfaction of our customers, so by keeping their experience as comfortable and hassle-free as possible, we generate the growth and customer patronage that allows us to keep evolving as a business. 2020 Goal Be the easiest airline in the world to fly measured by both industry benchmarking and customer satisfaction surveys. Progress The notion of becoming a hassle-free airline is a work in progress. We began tracking “hassle-free” data in July 2012, reaching a hassle-free satisfaction score of 65% in 2013. Also in 2013, we created a dedicated Innovation Department to focus on improving our customers’ entire journey — from the experience of buying a ticket, getting from curb to gate at the airport, the onboard experience, all the way to collecting luggage after landing. Among the Innovation Department’s most notable accomplishments has been the increased functionality of the Alaska Airlines smart phone app. In addition to saving on paper costs, mobile technology improves the customer’s ability to book, change or cancel travel on the go. Passengers are supplied with updated flight status, gate information and boarding times, and are able to check in, obtain boarding passes, and receive push notifications. Our app is consistently rated at 4.5 stars or higher on both iPhone and Android platforms. Inventive Improvements In 2013, Alaska Airlines’ Customer Innovation Department sponsored the company’s first annual Hackathon. Designed to find innovative ways of improving our customers’ day-of-flight experience, the Hackathon provides engineers and non-technical participants the opportunity to turn ideas into functioning prototypes that are then assessed by a panel of judges from outside the company to determine a winner. The top three ideas were awarded prizes based on factors such as marketability, ease of implementation, scalability, viability, and benefit to the business. The winning entry has moved on to pilot prototype development for testing with customers. 62 Report Profile 65 Organizational Profile 70 Performance Data: Environmental 72 Performance Data: Social 78 Performance Data: Economic 82 GRI Index 85 Section 5: Appendix Performance Data and GRI Index introduction environment society economy appendix appendix Report Profile About Alaska Air Group’s 2012-13 Sustainability Report This is Alaska Air Group’s second Sustainability Report. For any questions regarding this report or its contents, and our stakeholders, based on information regularly please contact us at sustainability@alaskaair.com. obtained from our customer satisfaction and employee surveys, frequent flier and industry forums, Employee It progresses the story that our 2012 report illustrated, Boundaries summarizing the progress we have made, significant Alaska Air Group is comprised of Alaska Airlines and impacts we have made on the environment, society, Horizon Air; this report includes data from both airlines, and economy, and our goals for the upcoming years. separately reporting on each airline individually where Included are links to useful information and publicly relevant and available. Report content is predominantly available resources regarding our financial, corporate focused on our U.S.-based inflight and ground-based governance, social and environmental policies and operations, including our maintenance facilities and performance. offices. While our commitments span our operations Resource Groups, our Corporate Travel, Disability and Community Advisory Boards, our Vendor Scorecard, internal staff experts, and from direct conversations with the communities and organizations we work with. In 2013, we completed a process identifying significant sustainability issues that impact or are impacted by our company and evaluated them internally and externally. Materiality results are shown below. throughout the U.S., Canada and Mexico, these This sustainability report provides basic information operations represent the majority of Alaska Air Group’s about Alaska Air Group’s environmental, social, environmental, social, and economic impacts. and economic performance from January 1, 2012 to December 31, 2013, unless otherwise stated; whenever possible we have included data showing trends though multiple years. There were no significant changes in our operational size, structure, ownership or supply chain during the reporting period. Process for Determining Report Content Engaging with our stakeholders is important to ensure we report on matters of importance to them. We have covered issues that are significant to Alaska Air Group 65 introduction environment economy society appendix appendix Aspects identified as having higher importance to Alaska Environmental Air Group or our stakeholders have associated goals ments, progress) Economy  Emissions & Fuel  Passenger & Employee Safety  Financial Performance  Waste  Employee Attraction &  Customer Satisfaction  Energy  Material Consumption Engagement  Diversity & Equal Opportunity  Corporate Giving & Community Support  Supplier Labor Practices  Drinking Water  Operational Compliance  Noise  Customer Privacy  Spills & Remediation  Training & Development  Environmental  Vendor Diversity  Indirect Economic Impacts Compliance report) HIGH MEDIUM LOW to further identify and prioritize material issues. (not included in report) criteria for stakeholder engagement and identification, (not included in this report. We are developing additional methods and (full disclosure, goals, commit- and commitments and are described in the narrative of Social  Deicing  Biodiversity  Human Rights  Water Use  Child Labor  Indigenous Rights  Procurement practices 66 environment introduction economy society appendix appendix 2012 Goals and Progress Although our priorities have changed since our 2012 report, our previously stated goals did not fall to the wayside — in fact, 78% of the sustainability ENVIRONMENTAL goals we published in our last report were either met or exceeded. Below is the progress we have made and metrics for each of those goals. Category 2013 Goal Aircraft Emissions Reduction Contribute to an industry-wide goal of reducing CO2 emissions by 50% by 2050, relative to 2005 levels. Status Progress O Reduced CO2e intensity by 2.8% over 2011. Inflight Recycling (Alaska) Collect and divert 70% of all inflight recyclable materials by yearend 2012, and increase collection rate to 90% by year-end 2015. Expand catering location recycling efforts to 100% of all catering locations by 2Q 2012. P In 2012 we missed our goal with a 66% diversion rate; in 2013 we exceeded our goal with a diversion rate of 77%. 100% of our catering locations now have recycling. Inflight Recycling (Horizon) Collect and divert more inflight recyclables by increasing our diversion rate by waste stream type: aluminum 85%; paper 80%; glass 100%; plastic 75%. In 2013 we modified this goal to: Collect 90% of all recyclable materials generated during inflight service by year-end 2013. P Horizon Air collected 91% of recyclable materials generated inflight in 2013. Building Energy Consumption Achieve a 22% reduction over 2008 baseline. O Historical square footage data used to evaluate energy intensity was found to be inaccurate, a recalculation of data using new numbers shows only 5% improvement. Biofuels Actively participate in strategic biofuel advisory groups and incentivize one or more projects that support the study and development of aviation biofuels in AAG's route system. P In addition to participating in the Washington State Aviation Fuels Work Group which is looking specifically at biofuel development throughout Washington State, we also signed an off-take agreement that will support biofuel development in Hawaii. Vehicle Fleet Emissions Increase percentage of electric motorized equipment by 20% (Alaska Airlines) P In 2013 our eGSE fleet hit 22% Establish GSE fuel use baseline and implement a system to track all types of GSE fuel consumption. P Implemented a new system to track fuel and establish fuel use baseline. Inflight Sourcing Continue to source inflight serviceware items with reusable, sustainable, recyclable, and/or compostable alternatives. P We established a baseline of all materials from which to measure progress, identifying sustainability criteria and tracking for sourcing. Our catering supply vendor is also collecting data. Building & Facility Waste Establish a standardized recycling program for the five largest company-owned non-airport facilities in Seattle by year-end 2012. P Formalized recycling programs now in effect at five Seattle-area locations, saving us $60K the first year in waste disposal fees. Paper Consumption Develop 2012 baseline of top papers P “Office Paper” scope defined and baseline completed for internal operational and office paper use. 67 environment introduction economy society appendix appendix SOCIAL 2012 Goals and Progress Category 2013 Goal Industry Leader in Safety & Compliance Alaska to complete the second of four levels of SMS implementation; Horizon to complete the first level of implementation. P Alaska and Horizon both completed Level 2 implementation on November 21, 2013. Achieve less than 5.5 Risk level 3+ events per 10,000 departures P Alaska 2013 Risk Level 3+ incident rate was 0.47; at Horizon, Risk Level 3+ rate was 0.56 in 2013. Alaska to reduce lost-time injuries by 5% over baseline to 4.66 per 100 employees. Horizon to reduce lost-time injuries to 2.82 per 100 employees. O 2013 LTI rates: Alaska: 4.71; Horizon: 4.97. Issue awareness training on Code of Conduct and Ethics through company-wide Employee Compliance Training. P Training was issued to all employees (apart from FAs) in 2013. Going forward this will be an annual training, part of our culture and not a separate call out goal. Freeze the pension plan covering management and dispatch employees and replace it with a generous, defined contribution plan. P Defined benefit pension plans have continued to be funded, well in excess of required amounts. We communicated the freeze to all affected plan participants, and freeze of accruals occurred Dec. 31, 2013. Maintain a “small company feel” by connecting employees through an eight-hour Flight Path seminar. P Completed in Spring 2013. Achieve a rate of 4.09 on the Kenexa Employee Engagement Index by the end of 2017. P Achieved average score of 4.09, meeting our goal four years early. Improve how we measure factors relevant to increasing applicant pool diversity to ensure our diversity outreach efforts are effective. Create formal expectations around coaching, mentoring and sponsoring employees. P Each officer identified one diverse employee in 2013 for a short-term supported assignment, and an “Advisory Board” (composed of officers) was created with the purpose of establishing strong diversity advocates in the officer group. Implement an employee giving and volunteerism portal. P Portal was launched in August 2013. Develop, Engage & Care for People Status Progress 68 environment introduction economy society appendix appendix ECONOMIC 2012 Goals and Progress Category 2012Goal Reduce costs Reduce costs per available seat mile (CASM) excluding fuel to 7.5 cents at Alaska and 12 cents at Horizon. Continue to reduce CASM at Alaska and Horizon to remain competitive with lowercost airlines for the long-term. Status Progress Alaska reduced CASM to 7.54 cents in 2013; Horizon reached 12.73 cents. partially met Optimize Profit and Value Created Continue to keep 10 cents on every dollar we collect (before taxes) by responding nimbly to changing market conditions and continuing to lower costs. P Achieved ROIC of 13.6% in 2013. Growth Grow Air Group capacity (measured by available seat miles) 4% to 8% annually, assuming acceptable profitability. Establish Alaska Air Group as the preferred carrier for travelers living on the West Coast. P In 2012 we saw 6% growth; in 2013 this number increased to 7%. Accept delivery of three 737-800s and four 737-900ERs in 2012 and up to nine more in 2013. P We accepted three 737-800’s and four 737-900ER’s in 2012, and nine 737-900ER’s in 2013. Develop performance standards for our integrated buyers that ensure a minimum of one diverse supplier is included in all RFPs issued by SCM. O In 2012 we met this goal, but in 2013 we fell short; more information can be found on page 46. Suppliers 69 introduction environment society economy appendix appendix Organizational Profile Management & Governance Alaska Air Group, Inc. is a Certified C Corporation, organized as a Delaware corporation in 1985. Subsidiaries of Alaska Air Group include: • Alaska Airlines, Inc. • Horizon Air Industries, Inc. For the purposes of this report, only Alaska Airlines, Inc. and Horizon Air Industries, Inc. have been included. Information about the remaining entities can be found on Alaska Air Group’s publicly consolidated financial statements here. Sustainability initiatives at Alaska Air Group are overseen by a Sustainability Steering Committee composed of representatives from most major departments who are management or senior management employees. This committee oversees cross-functional working groups focusing on our environmental, social and financial performance. The Steering Committee reports informally to the Board of Directors. 70 introduction environment society economy appendix appendix External Charters & Industry Associations Alaska Airlines was the first domestic airline to join SAFUG (Sustainable Aviation Fuel Users Group) in July 2009. SAFUG is a global group of airlines, airplane and equipment manufacturers working to promote and accelerate the commercialization of sustainable aviation fuels. Through our membership with SAFUG, we have pledged to consider fuels that minimize biodiversity impacts; require minimum land, water, and energy to produce; and don’t compete with food or freshwater resources. More information can be found at http://www.safug.org/. Alaska Air Group is a member of the following organizations: International Air Transportation Association (IATA) IATA is the trade association for the majority of the world’s airlines, representing approximately 240 airlines and more than 80% of total air traffic. IATA supports airline activity and helps formulate industry policy and standards. Airlines for America (A4A) Formerly known as Air Transport Association of America, Inc. (ATA), Airlines for America is the only trade organization of the principal U.S. airlines. A4A members and their affiliates transport more than 90% of all U.S. airline passenger and cargo traffic, and is the main advocate for the airline industry in national conversations. Regional Airline Association (RAA) RAA represents North American regional airlines, and the manufacturers of products and services supporting the regional airline industry, before the Congress, DOT, FAA and other federal agencies. With more than 13,000 regional airline flights every day, regional airlines operate more than 50% of the nation’s commercial schedule. Alaska Air Carriers Association (AACA) The Alaska Air Carriers Association provides safety and educational training and support to members, and facilitates the distribution of aviation safety and business management support. Alaska Airlines donates Free Standby Travel for air carrier employees to the AACA annual convention and member dinner. 71 introduction environment society economy appendix appendix Performance Data: Environmental Operating Fleet Information (as of Dec. 31, 2013) Alaska Air Group proudly operates a fleet of 182 modern, fuel-efficient aircraft. As of Dec. 31, 2013, the average age of our combined aircraft is less than ten years old, helping our fleets remain some of the most fuel-efficient in the industry. More information can be found here. Alaska Airlines Total in Fleet Average Age Boeing 737 Freighters and Combis 6 20.2 Boeing 737-400 / 700 39 16.1 Boeing 737-800 / 900 / 900ER 86 5.8 125 9.0 131 9.5 Bombardier Q400 51 7.1 Total 51 7.1 Alaska Air Group Total 182 8.8 Boeing 737 Passenger Aircraft Total Horizon Air 72 introduction environment economy society appendix appendix Emissions Our emissions are calculated annually by third-party experts using standard greenhouse gas (GHG) inventory protocol. Since 2004, our operations have grown significantly in size, resulting in growth in our overall emissions but with a significant decrease in our GHG intensity. Our intensity ratios are based on RPMs, showing a decrease in GHG emissions per unit of production for Alaska Air Group. CO2e (MM kgs) 2004 2005 2006 2007 200819 2009 2010 2011 2012 2013 Alaska Airlines 3,523 3,428.5 3,471.3 3,469.4 3,313.6 3,026.6 3,171.0 3,435.7 3,647.3 3,891.2 Horizon Air 494.9 510.5 540.6 644.9 510.1 596.5 572.3 457.2 440.2 445.6 Total CO2e 4,017.9 3,939 4,011.9 4,114.4 3,823.7 3,623.1 3,743.3 3,892.9 4,087.5 4,336.8 224 209 201 196 187 174 164 158 154 153 GHG Intensity 19 After 2008 our baseline was updated due to the availability of improved primary data that was unavailable at the time of the original calculation, and reflects a revision in the aircraft fuel factor and emission factors due to industry updates. As a result, there is a slight difference in calculations after that year as compared to 2004-2008, but the difference was not significant enough to warrant retroactively updating the pre-2008 data. 73 introduction environment economy society appendix appendix Emissions GHG Inventory (Alaska Air Group) 2012 2013 Total flights 281,639 291,459 Jet fuel consumption (MM kgs) 1,278.7 1,357.3 Scope 1 emissions (MM kgs of CO2e) 4,074.4 4,324.1 Scope 2 emissions (MM kgs of CO2e) 13.1 12.7 Aircraft emissions: CO2 (MM kgs) 4,019.7 4,266.7 Aircraft emissions: CH4 (kgs) 40,780 42,266 Aircraft emissions: N20 (kgs) 131,255 139,261 Aircraft emissions: CO2e (MM kgs) 4,061.2 4,310.7 Aircraft emissions: SOx (kgs) 195,162 204,035 Aircraft emissions: NOx (kgs) 1,688,134 1,772,471 Total GHG emissions (MM kgs of CO2e) 4,087.5 4,336.9 Available Seat Miles (ASM) 30,848,839 33,089,279 133 131 26,506,125 28,334,664 154 153 2,717,369 2,905,772 1,505 1,492 Intensity ratio (kgs CO2e/1,000 ASM) Revenue Passenger Miles (RPM) Intensity ratio (kgs CO2e/1,000 RPM) Revenue Ton Miles (RTM) Intensity ratio (kgs CO2e/1,000 RTM) Scope 1 & 2 Emissions2 2012 2013 Aircraft 4,061,264,779 4,310,793,360 Heating 5,489,372 5,308,952 Electricity 13,110,959 12,698,464 GSE 7,626,941 8,019,178 2 Calculated in kgs of CO2e Aircraft Emissions To calculate aircraft emissions, the number of Landing/Take-off (LTO) cycles per aircraft type was applied to the appropriate aircraft fuel factor to calculate total fuel consumed during the LTO cycle. Total fuel consumed during LTO was then subtracted from the total fuel used to calculate total fuel consumed during cruising. It is assumed that the remaining fuel usage is correlated only with cruising. Utilizing emission factors, the emissions associated with LTO and Cruising were then calculated. It is understood by the industry that there are no CH4 emissions during cruising. 74 introduction environment society economy appendix appendix Emissions GSE Emissions To calculate GSE emissions, we used the average GSE emissions used in 2010 and applied the total number of LTOs each year. The methodology used was to estimate average emissions per LTO, as GSE activity is tied to the number of flights the GSE serviced and the assumption that number of LTOs is a good indication of the GSE activity level. To calculate eGSE emissions, kWhs usage was provided by the Port of Seattle. Based on location, we utilized the egrid WECC Northwest to calculate emissions from electricity usage. End of year data for 2013 was unavailable, so average kWhs from November and December was used to estimate this data. Emissions from our Facilities Building energy consumption was calculated by applying energy consumption data to the appropriate emission factor. Types of energy included in the intensity ratio are electricity and heating fuel; we have achieved a 3% reduction in annual energy intensity (kBtu/sf) since our last report. Facilities Emission Factor Sources Electricity: World Resources Institute - GHG Protocol Calculation tools - Emission-Factors-from-CrossSector-Tools-(August 2012) - Electricity US - Table 4. “Year 2009 US Regional Electricity Emission Factors for CO2, CH4 and N20”. Natural Gas: World Resources Institute (2008). GHG Protocol tool for stationary combustion, v4; Energy Conversion Factors are from the GHG Protocol tool, Emission-Factors-from-Cross-SectorTools. August 2012. 140,590 Other Fuel: EPA Mandatory Reporting Emission Factors 2011 for heating oil. Heating oil emission factors were used due to how the data was captured in Ecova. Both propane and heating oil consumption was lumped into one category. SBC and Alaska chose to utilize the larger emission factor of the two in order to prevent underestimation of emissions. One facility - Cordova 160 - utilized jet fuel (and tracked separately), the emission factor for jet fuel as an energy source was used (EPA Climate Leaders). 75 introduction environment society economy appendix appendix Emissions Boundaries The majority of the facilities we operate in are owned by others and leased by our airlines. Our calculations include GHG emissions from facilities and assets we control, including facilities owned or operationally controlled by Alaska Air Group. Facilities under control of airport operations have not been included. Scope 1 (emissions from the direct combustion of fossil fuels) and Scope 2 (indirect emissions generated during the production of energy) emissions are included in our inventory calculations. Scope 3 emissions are insignificant when compared to our other emissions, and have not been included. Data collected reflects GHG emissions from: • Aircraft fuel consumption • GSE fuel consumption • eGSE electricity consumption • Electricity used in facilities controlled by Alaska Air Group Estimations Where data was unavailable, data was extrapolated from nine different facilities between 2008 and 2012. In 2013, end of year data was not available in some cases. Consumption was calculated utilizing estimated usage based on the most recent bills available. 76 introduction environment society economy appendix appendix Waste & Recycling During the 2012-2013 reporting period, Alaska Air Group generated 7,991 tons of total inflight waste; of this, 2,861 tons of recyclables were successfully diverted by our flight attendants during inflight services. Solid waste is also generated by our ground-based facilities, but the data is not currently available. All hazardous waste is appropriately managed and disposed at permitted facilities in accordance with local, state, and federal regulations. Although the landfilling of certain types of hazardous waste is allowed by law, we strive to exceed required levels of compliance by ensuring that all of our hazardous waste is recycled or permanently destroyed. 77 environment introduction economy society appendix appendix Performance Data: Social Employee Demographics Alaska Air Group is committed to equal opportunity for all employees. We prohibit discrimination in hiring, promotion, and other employment decisions on the basis of race, gender, age, religion, or other basis, and comply with all federal, state and local laws. The information below illustrates Alaska Air Group’s employee demographics, including ethnic and gender diversity at various levels within the company. TOTAL EMPLOYEES EMPLOYEES BY AGE • Minority Groups represent 20% of our employee base. • 58.5% of our employees have been with the company for 10 or more years. • Of those who have been with us for 10+ years, 52% are female, and 16% are non-white. Gender Diversity (% Female) 2012 2013 Board & Executive Leadership Diversity 2012 2013 Vice President and Above 29% 29% Board of Directors (% Non-White) 36% 45% Managing Directors 41% 43% Board of Directors (% Female) 27% 36% Supervisor//Manager/Director 42% 42% Executive Committee (% Female) 12% 12% All Other Employees 55% 55% Overall 54% 54% 78 introduction environment society economy appendix appendix Employee Promotion & Retention Rates (Alaska Air Group) Retention of well-trained, high-performing individuals in our employee base is paramount to providing stellar services. Our company-wide focus on inclusion, talent development and employee engagement has resulted in employee retention rates that are consistently over 90%. Promotion Rates (Supervisor and Above) 2011 2012 2013 Minority Promotion 7.1% 10.0% 12.3% White Promotion 14.9% 9.1% 9.9% Male Promotion 13.4% 8.4% 10.5% Female Promotion 14.8% 10.3% 9.9% Veteran Promotion 12.3% 2.5% 13.9% Non-veteran Promotion 14.1% 9.8% 9.9% Promotion Rates (All Levels) 2011 2012 2013 Minority Promotion 2.1% 1.6% 2.8% White Promotion 2.6% 2.1% 2.4% Male Promotion 2.6% 2.1% 2.6% Female Promotion 2.4% 2.0% 2.4% Veteran Promotion 2.0% 1.2% 2.8% Non-veteran Promotion 2.5% 2.1% 2.5% Employee Retention Rates (2012-2013) 2011 2012 2013 Male 90.7% 92.3% 91.2% Female 91.4% 92.5% 92.9% <30 years of age 75.5% 75.5% 77.5% 30-50 years of age 92.3% 94.1% 93.7% 50+ years of age 93.8% 94.6% 94.0% Veterans 89.8% 92.5% 89.9% Non-Veterans 91.2% 92.4% 92.3% Minority groups 89.4% 90.4% 90.1% Whites 91.9% 93.3% 92.9% 79 introduction environment economy society appendix appendix Labor Unions At 74.5%, the majority of our employees are represented by labor unions21 . The breakdown of those participating, as well as our other employees, is as follows: Union Group (Alaska Airlines) Employee Group Air Line Pilots Association International (ALPA) Association of Flight Attendants (AFA) International Association of Machinists and Aerospace Workers (IAMAW) International Association of Machinists and Aerospace Workers (IAMAW) Aircraft Mechanics Fraternal Association (AMFA) Transport Workers Union of America (TWU) 2012 2013 Pilots 1,452 1,440 Flight Attendants 2,989 3,132 Ramp Service and Stock Clerks 573 598 Clerical, Office & Passenger Services 2,495 2,508 Mechanics, Inspectors & Cleaners 624 632 Dispatchers 39 41 8,172 8,351 Subtotal Union Employees Mexico 102 99 Non-Union Employees 1,679 1,751 Total Employees 9,953 10,201 Employee Group 2012 2013 Pilots 550 551 Flight Attendants 505 545 International Brotherhood of Teamsters (IBT) Mechanics & Technicians 298 274 Transport Workers Union of America (TWU) Dispatchers 18 16 Station Personnel (Canada) 46 49 Maintenance Stores 31 33 Subtotal Union Employees 1,448 1,468 Wage Scale Employees 1,178 1,170 Non-Union Employees 349 338 Total Employees (Horizon) 2,975 2,976 Union Group (Horizon Air) International Brotherhood of Teamsters (IBT) Association of Flight Attendants (AFA) National Automobile, Aerospace, Transportation and General Workers International Association of Machinists and Aerospace Workers (IAMAW) 20 20 Includes Canadian Management 21 More information can be found at sec.gov 80 environment introduction economy society appendix appendix Passenger & Employee Safety Safety is a top priority at Alaska Air Group, and we are working hard to integrate it into every aspect of our company’s culture. The majority of injuries during the 2012-2013 reporting period occurred during baggage lifting or other cargo-related instances. Incidents identified as having a higher severity level (Risk Level 3 or above) have been reduced by 83% since the end of 2011, accomplishing our 2012 goal. More information can be found on page 40. Injury Rates1 (Alaska Airlines) OJI LTI Risk Level 3+ 2010 8.31 5 n/a 2011 8.45 5.19 2.87 2012 8.04 4.91 0.98 2013 11.89 4.71 0.47 OJI = On-the-Job Injuries Injuries that occur while at work. LTI = Lost Time Injuries Accidents resulting in personnel not being able to Injury Rates (Horizon Air) OJI LTI Risk Level 3+ 2010 7.94 2.95 n/a 2011 5.88 2.26 3.42 2012 4.81 2.93 0.91 2013 7.51 4.97 0.56 2 work as a result of their injury. 1, 2 Incidents per 10,000 departures 81 introduction environment economy society appendix appendix Performance Data: Economic Economic Performance Celebrating the most profitable year in our 81-year history, our company is making great strides. The following outlines our revenue, costs, and distributed economic value. Quantity of Services Provided 2012 2013 27,007 28,833 Passenger Revenue per Available Seat Miles (PRASM, in cents) 12.82 12.67 Revenue per Available Seat Mile (RASM, in cents) 14.82 14.74 Economic value retained1(millions) $259 $146 Direct economic value generated (millions) $5,026 $5,332 $1,126 $1,191 Dividends (millions) - $28 Total Revenue Passenger Miles (MM RPMs) Direct Economic Value Generated Direct Economic Value Distributed Employee wages, benefits & incentives (millions) Interest (millions) 23 $46 $3524 Taxes paid (U.S.) (millions) $78 $149 Community Investments (millions) $7.8 $7.6 23 Cash paid in interest net of amount capitalized 24 Economic value generated less economic value distributed 82 introduction environment economy society appendix appendix Economic Performance Indirect Economic Value Equity: Debt: $1,106 $1,534 $1,174 $1,307 $1,421 $1,032 $2,029 $871 Alaska Air Group contributes to economic activity indirectly by supporting activity related to our everyday functions, such as purchasing, vendor operations and support industries. For example: • Every 1 job at Alaska Air Group generates an additional 2.5 jobs in Washington State. • Every $1M increase in revenue at Alaska Air Group results in 9.56 new jobs in the local economy. • For every $1 increase in total output, output in the overall Washington State economy increases by $2.44. • For every one dollar increase in total output, labor income in Washington State increases by $0.55. 83 introduction environment society economy appendix appendix Benefit Plan Obligations As of Dec. 31, 2013, Alaska Air Group has fully funded its defined benefit pension plan. Depending on position and term of service before retirement, employee retirement plans may include pensions, defined contribution plans, or post-retirement medical benefits. The level of participation in our retirement plans is high; 90% at Alaska Airlines, and 93% at Horizon Air. Pension Plan Liabilities 2012 2013 Projected Benefit Obligation (PBO, in millions) $1,873 $1,709 Fair Value of Plan Assets (millions) $1,538 $1,769 Funded Status 82% 104% 84 introduction environment society economy appendix appendix GRI Index This report is prepared in accordance with the internationally recognized Global Reporting Initiative G4 Core Reporting Guidelines. The content of the report has been reviewed and approved by Alaska Air Group, and has been assessed against the GRI principles for defining content and quality. External Assurance is not currently sought. General Standard Disclosures G4 General Standard Disclosure Chapter Section or Disclosure Strategy & Analysis G4-1 Provide a statement from the most senior decision-maker of the organization about the relevance of sustainability to the organi- Introduction Message from the CEO zation and the organization’s strategy for addressing sustainability Organizational Profile G4-3 Report the name of the organization Introduction About Alaska Air Group G4-4 Report the primary brands, products, and services Introduction About Alaska Air Group G4-5 Report the location of the organization’s headquarters Introduction About Alaska Air Group G4-6 Report the number of countries where the organization operates, and names of countries where either the organization has Introduction Markets Served significant operations or that are specifically relevant to the sustainability topics covered in the report G4-7 Report the nature of ownership and legal form Appendix Organizational Profile G4-8 Report the markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries) Introduction Markets Served G4-9 Report the scale of the organization Introduction Markets Served Appendix Social Performance Data Appendix Economic Performance Data Diversity & Equal Opportunity Social Performance Data G4-10 a. Report the total number of employees by employment contract and gender Social b. Report the total number of permanent employees by employment type and gender Appendix c. Report the total workforce by employees and supervised workers and by gender d. Report the total workforce by region and gender e. Report whether a substantial portion of the organization’s work is performed by workers who are legally recognized as selfemployed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries) 85 introduction environment G4 society economy General Standard Disclosure Chapter appendix appendix Section or Disclosure Organizational Profile (continued) G4-11 Report the percentage of total employees covered by collective bargaining agreements Appendix Social Performance Data G4-12 Describe the organization’s supply chain Social Supply Chain Management G4-13 Report any significant changes during the reporting period regarding the organization’s size, structure, ownership, or its supply Appendix Report Profile chain G4-14 Report whether and how the precautionary approach or principle is addressed by the organization We do not explicitly use the precautionary principle in developing our policies. G4-15 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization Appendix Organizational Profile Appendix Organizational Profile Appendix Organizational Profile Appendix Report Profile subscribes or which it endorses G4-16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization: a. Holds a position on the governance body c. Provides substantive funding beyond routine membership dues b. Participates in projects or committees d. Views membership as strategic Identified Material Aspects & Boundaries G4-17 a. List all entities included in the organization’s consolidated financial statements or equivalent documents b.Report whether any entity included in the organization’s consolidated financial statements or equivalent documents is not covered by the report G4-18 a. Explain the process for defining the report content and the Aspect Boundaries b. Explain how the organization has implemented the Reporting Principles for Defining Report Content G4-19 List all the material Aspects identified in the process for defining report content Appendix Report Profile G4-20 For each material Aspect, report the Aspect Boundary within the organization Appendix Report Profile 86 introduction G4 environment society economy General Standard Disclosure Chapter appendix appendix Section or Disclosure Identified Material Aspects & Boundaries (continued) G4-21 For each material Aspect, report the Aspect Boundary outside the organization as follows: Appendix Report Profile Environmental Energy Appendix Environmental Performance a.Report whether the Aspect is material outside of the organization b. If the Aspect is material outside of the organization, identify the entities, groups of entities or elements for which the Aspect is material. In addition, describe the geographical location where the Aspect is material for the entities identified c.Report any specific limitation regarding the Aspect Boundary outside the organization G4-22 Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements Data G4-23 Report significant changes from previous reporting periods in the Scope and Aspect Boundaries Introduction Our Sustainability Strategy Environmental Energy Social Supply Chain Management Appendix 2012 Goals & Progress Stakeholder Engagement G4-24 Provide a list of stakeholder groups engaged by the organization Appendix Report Profile G4-25 Report the basis for identification and selection of stakeholders with whom to engage Appendix Report Profile G4-26 Report the organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder Appendix Report Profile Appendix Report Profile group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process G4-27 Report key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting. Report the stakeholder groups that raised each of the key topics and concerns 87 introduction environment G4 society economy General Standard Disclosure Chapter appendix appendix Section or Disclosure Report Profile G4-28 Reporting period for information provided. G4-29 Date of most recent previous report G4-30 Reporting cycle Introduction Introduction Appendix Report Profile Appendix Report Profile Annual G4-31 Contact point for questions regarding the report or its contents Appendix G4-32 a.Report the ‘in accordance’ option the organization has chosen GRI Index Report Profile b.Report the GRI Content Index for the chosen option G4-33 Report the organization’s policy and current practice with regard to seeking external assurance for the report GRI Index Governance G4-34 Report the governance structure of the organization, including committees of the highest governance body. Identify any commit- Appendix Organizational Profile Introduction Honesty & Ethical tees responsible for decision-making on economic, environmental and social impacts Ethics & Integrity G4-56 Describe the organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics Behavior Social Vendor Labor Practices 88 introduction environment society economy appendix appendix Specific Standard Disclosures G4 DMA & Indicators Chapter Section or Disclosure ECONOMIC Economic Performance G4-DMA Generic Disclosures on Management Approach Economy Economic Performance G4-EC1 a. Appendix Economic Performance Data Appendix Economic Performance Data Economy Supporting the Regional Economy Appendix Economic Performance Data Social Corporate Giving & Community G4-EC3 Report the direct economic value generated and distributed (EVG&D) on an accruals basis including the basic components for the organization’s global operations. Coverage of the organization’s defined benefit plan obligations Indirect Economic Impacts G4-DMA G4-EC7 Generic Disclosures on Management Approach Development and impact of infrastructure investments and services supported Support G4-EC8 Significant indirect economic impacts, including the extent of impacts Economy Supporting the Regional Economy Economy Supporting the Regional Economy Appendix Economic Performance Data ENVIRONMENTAL Materials G4-DMA Generic Disclosures on Management Approach Environment Materials & Supplies G4-EN1 Report the total weight or volume of materials that are used to produce and package the organization’s primary prod- Environment Materials & Supplies Environment Materials & Supplies ucts and services during the reporting period, by: a.Non-renewable materials used b.Renewable materials used G4-EN2 Percentage of materials used that are recycled input materials 89 introduction environment G4 society DMA & Indicators economy appendix appendix Chapter Section or Disclosure Energy G4-DMA Generic Disclosures on Management Approach Environment Energy G4-EN3 Energy consumption within the organization Environment Emissions & Fuel Appendix Environmental Performance Data G4-EN5 Energy intensity Appendix Environmental Performance Data G4-EN6 Reduction of energy consumption Appendix Environmental Performance Data G4-EN7 Reductions in energy requirements of products and services Environment Emissions & Fuel G4-DMA Generic Disclosures on Management Approach Environment Emissions & Fuel G4-EN15 Direct greenhouse gas (GHG) emissions (Scope 1) Appendix Environmental Performance Data G4-EN16 Energy indirect greenhouse gas (GHG) emissions (Scope 2) Appendix Environmental Performance Data G4-EN18 Greenhouse gas (GHG) emissions intensity Environment Emissions & Fuel Appendix Environmental Performance Data Environment Emissions & Fuel Appendix Environmental Performance Data Appendix Environmental Performance Data Environment Waste & Recycling Emissions G4-EN19 G4-EN21 Reduction of greenhouse gas (GHG) emissions NOX, SOX, and other significant air emissions Effluents & Waste G4-DMA Generic Disclosures on Management Approach G4-EN23 Total weight of waste by type and disposal method Appendix Environmental Performance Data G4-EN24 Total number and volume of significant spills Environment Managing Other Impacts G4-DMA Generic Disclosures on Management Approach Environment Managing Other Impacts G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmen- Environment Managing Other Impacts Compliance tal laws and regulations 90 introduction environment G4 society DMA & Indicators economy Chapter appendix appendix Section or Disclosure SOCIAL Employment G4-DMA Generic Disclosures on Management Approach Social Diverse Employee Attraction, Retention & Engagement Supply Chain Management G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region Appendix Social Performance Data Occupational Health & Safety G4-DMA Generic Disclosures on Management Approach Social Passenger & Employee Safety G4-LA5 Percentage of total workforce represented in formal joint management-worker health and safety committees that help Social Diverse Employee Attraction, monitor and advise on occupational health and safety programs G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender Retention & Engagement Appendix Social Performance Data Social Passenger & Employee Safety Appendix Social Performance Data Social Diverse Employee Attraction, Training & Education G4-DMA Generic Disclosures on Management Approach Retention & Engagement G4-LA10 Programs for skills management and lifelong learning that support the continued employability of employees and as- Social sist them in managing career endings Diverse Employee Attraction, Retention & Engagement Diversity & Equal Opportunity G4-DMA Generic Disclosures on Management Approach Social Diverse Employee Attraction, Retention & Engagement G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age Social group, minority group membership, and other indicators of diversity Diverse Employee Attraction, Retention & Engagement Appendix Social Performance Data 91 introduction environment G4 society DMA & Indicators economy Chapter appendix appendix Section or Disclosure Supplier Assessment for Labor Practices G4-DMA Generic Disclosures on Management Approach Social Supply Chain Management G4-LA14 Percentage of new suppliers that were screened using labor practices criteria Social Supply Chain Management G4-LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken. Social Supply Chain Management Social Corporate Giving & Community Local Communities G4-DMA Generic Disclosures on Management Approach Support G4-SO2 Operations with significant actual and potential negative impacts on local communities. Economic Supporting the Regional Economy Social Corporate Giving & Community Support Economic Supporting the Regional Economy Supplier Assessment for Impacts on Society G4-DMA Generic Disclosures on Management Approach Social Supply Chain Management G4-SO9 Percentage of new suppliers that were screened using criteria for impacts on society Social Supply Chain Management Social Passenger & Employee Safety Economy Customer Confidentiality Customer Health & Safety G4-DMA Generic Disclosures on Management Approach Customer Privacy G4-DMA Generic Disclosures on Management Approach 92 19300 International Blvd, Seattle, WA 98188 206-433-3200 www.alaskaair.com © 2014 Alaska Air Group, Inc. All Rights Reserved. No part of this report may be reproduced without permission of Alaska Air Group Inc. This report is intended to be read in an electronic format. Please consider the environment before you print. 93 Carbon Emissions Overview (2014) In 2014, Alaska Air Group, the parent company of Alaska Airlines and Horizon Air, reported a 2% reduction in emissions intensity per revenue passenger mile (RPM) compared to the previous year. This achievement was part of a broader 30% reduction in emissions intensity over the past decade, accomplished through fleet advancements and flight technology improvements. (https://news.alaskaair.com/newsroom/alaska-air-group-reduced-its-emissionsintensity-by-30-percent-over-the-past-10-years-2014-accomplishments-detailed-inthird-annual-sustainability-report/?utm_source ) Despite a 6.5% increase in traffic in 2014, the company's focus on efficiency allowed for continued reductions in emissions intensity. Emissions Intensity and Efficiency Fleet Modernization Alaska Airlines continued its commitment to fuel efficiency by retrofitting 47 Boeing 737 aircraft with new winglets, resulting in an estimated 500 metric tons of emissions reduction per aircraft annually. (https://news.alaskaair.com/newsroom/alaska-airgroup-reduced-its-emissions-intensity-by-30-percent-over-the-past-10-years-2014accomplishments-detailed-in-third-annual-sustainability-report/?utm_source ) Operational Enhancements The airline's adoption of advanced flight procedures and technologies contributed to significant fuel savings. Over the past decade, these efforts have avoided burning 531 million gallons of fuel, equivalent to removing one million cars from the road for a year. Flight Procedures and Innovation Alaska Airlines maintained its position as the most fuel-efficient U.S. domestic airline in 2014, achieving a Fuel Efficiency Score (FES) of 1.14, surpassing the industry average. This ranking reflects the airline's ongoing investments in efficient aircraft and flight operations. (https://theicct.org/sites/default/files/publications/ICCT_USairlineranking_2014.pdf?utm_source ) Ground Operations and Infrastructure Electric Ground Support Equipment (GSE) In 2014, Alaska Air Group expanded its electric GSE fleet by installing over 200 new electric vehicles at Seattle-Tacoma International Airport, nearly doubling its electric ground service fleet. Recycling Initiatives The company collected 2,200 tons of material for inflight recycling, demonstrating its commitment to reducing waste and promoting sustainability Carbon Emissions Overview (2015) In 2015, Alaska Airlines maintained its position as the most fuel-efficient U.S. airline for the fifth consecutive year, according to the International Council on Clean Transportation (ICCT). The airline achieved a 33% reduction in carbon emissions per revenue passenger mile (RPM) over the past decade, underscoring its commitment to environmental stewardship.(https://news.alaskaair.com/newsroom/alaska-airlinesrated-1-fuel-efficient-u-s-carrier-for-fifth-year-in-a-row/?utm_source) Emissions Intensity and Efficiency Fleet Modernization Alaska Airlines continued to invest in fuel-efficient aircraft and technologies. The airline's young fleet of Boeing 737 and Bombardier Q400 aircraft contributed significantly to its fuel efficiency. Additionally, the implementation of split-scimitar winglets on its Boeing 737 fleet further enhanced aerodynamic performance, leading to reduced fuel consumption. (https://news.alaskaair.com/newsroom/alaska-airlinesrated-1-fuel-efficient-u-s-carrier-for-fifth-year-in-a-row/?utm_source ) Operational Enhancements The airline expanded its use of Required Navigation Performance (RNP) procedures, enabling more direct and efficient flight paths. These advanced navigation techniques contributed to significant fuel savings and emissions reductions. Flight Procedures and Innovation In 2015, Alaska Airlines partnered with Boeing and the Port of Seattle to conduct a $250,000 biofuel infrastructure feasibility study, aiming to explore the use of sustainable aviation biofuels. Additionally, the airline collaborated with Gevo Inc. to plan the first commercial flight using alcohol-to-jet fuel, showcasing its commitment to alternative fuel sources. (https://sustainability.uw.edu/blog/2016-10/csr-thursdayalaska-airlines?utm_source ) Ground Operations and Infrastructure Electric Ground Support Equipment (GSE) Alaska Airlines expanded its electric GSE fleet, further decreasing emissions associated with ground activities. By 2015, the airline had installed over 200 new electric vehicles at Seattle-Tacoma International Airport, nearly doubling its electric ground service fleet. Waste Reduction Initiatives The airline launched an onboard composting program for coffee grounds, addressing the more than 250,000 pounds of coffee boarded each year. As a result, total waste sent to landfills decreased from 4,173 tons in 2014 to 3,065 tons in 2015. (https://sustainability.uw.edu/blog/2016-10/csr-thursday-alaska-airlines?utm_source ) https://www.alaskaair.com/content/about-us/sustainabilityreport/environment/inflight-materials-and-sourcing Carbon Emissions and Fuel Efficiency (2016) In 2016, Alaska Airlines improved its fuel efficiency by 1.4% compared to the previous year, as measured by seat-miles per gallon. This enhancement contributed to the airline maintaining its position as the most fuel-efficient U.S. domestic carrier for the seventh consecutive year, according to the International Council on Clean Transportation (ICCT). (https://news.alaskaair.com/alaska-airlines/alaska-is-the-mostfuel-efficient-airline/?utm_source ) Fleet Modernization and Operational Enhancements • Fleet Advancements: Alaska Airlines continued to invest in a fuel-efficient fleet, preparing to introduce the Boeing 737 MAX, which is approximately 13% more fuel-efficient than previous models. (https://www.alaskaair.com/content/aboutus/sustainability-report?utm_source ) • Required Navigation Performance (RNP): The airline's implementation of RNP procedures saved over 518,000 gallons of fuel in 2016 alone, reducing carbon emissions by more than 11 million pounds. (https://www.alaskaair.com/content/about-us/sustainability-report?utm_source ) • Scimitar Winglets: Installing these winglets on aircraft contributed to an additional savings of 627,437 gallons of fuel, equating to a reduction of over 13 million pounds of carbon emissions. Sustainable Aviation Fuel (SAF) Initiatives In November 2016, Alaska Airlines completed the world's first commercial flight using biofuel derived from forest residuals. The Boeing 737-800 flight from Seattle to Washington, D.C., utilized a 20% blend of this innovative biofuel, developed by the Northwest Advanced Renewables Alliance (NARA). The airline estimated that replacing 20% of its fuel supply at Seattle-Tacoma International Airport with this biofuel could reduce carbon emissions by approximately 142,000 metric tons annually. (https://www.cntraveler.com/story/alaska-airlines-fueled-a-plane-withtrees?utm_source ) Ground Operations and Infrastructure • Electric Ground Support Equipment (GSE): Alaska Airlines expanded its use of electric GSE, reducing emissions associated with ground activities. • Onboard Composting Program: The airline launched an onboard composting program for coffee grounds, addressing the more than 250,000 pounds of coffee boarded each year. As a result, total waste sent to landfills decreased from 4,173 tons in 2014 to 3,065 tons in 2015. https://www.alaskaair.com/content/about-us/sustainability-report Carbon Emissions and Fuel Efficiency (2017) In 2017, Alaska Airlines was recognized as the most fuel-efficient U.S. airline for the seventh consecutive year by the International Council on Clean Transportation (ICCT). The airline achieved a 13% lower fuel consumption per revenue passenger mile compared to the industry average, highlighting its commitment to environmental stewardship. (https://www.axios.com/2017/12/14/the-most-fuel-efficient-us-airlines1513209558?utm_source ) Fleet Modernization and Operational Enhancements Winglet Installation Alaska Airlines retrofitted its Boeing 737 fleet with split-scimitar winglets in 2017. These aerodynamic enhancements improved fuel efficiency by 3% to 5% per aircraft, contributing to significant fuel savings and emissions reductions. Integration of Virgin America Following the acquisition of Virgin America, Alaska Airlines began integrating Virgin's fleet of Airbus A320 aircraft. This integration presented challenges in maintaining fuel efficiency due to differences in aircraft performance. However, Alaska Airlines committed to optimizing operations across the combined fleet to uphold its environmental standards. (https://sustainabilityreports.com/reports/alaska-air-groupinc-2017-sustainability-report-pdf/?utm_source ) Sustainable Aviation Fuel (SAF) Initiatives Building on its pioneering biofuel flight in 2016, Alaska Airlines continued to explore the use of sustainable aviation fuels (SAF) in 2017. The airline collaborated with industry partners to assess the feasibility of incorporating SAF into regular operations, aiming to reduce lifecycle greenhouse gas emissions by up to 80% compared to conventional jet fuel. (https://www.twelve.co/post/alaska-airlines-multi-faceted-approach-tobecoming-more-sustainable?utm_source ) Ground Operations and Infrastructure Electric Ground Support Equipment (GSE) Alaska Airlines expanded its use of electric ground support equipment in 2017, reducing emissions associated with ground operations. The airline's investment in electric GSE contributed to lower fuel consumption and supported its broader sustainability goals. (https://www.alaskaair.com/content/about-us/corporateimpact?utm_source ) Waste Reduction Initiatives The airline implemented comprehensive recycling and composting programs across its operations. These initiatives aimed to divert waste from landfills, promote resource conservation, and minimize the environmental impact of ground services For a detailed overview of Alaska Airlines' sustainability initiatives in 2017, you can refer to their file:///C:/Users/murta/Downloads/Alaska%20Air%20Group%20Inc%202017%20Sustai nability%20Report%20(1).pdf Carbon Emissions and Fuel Efficiency (2018) In 2018, Alaska Airlines experienced a decline in its fuel efficiency rankings. The International Council on Clean Transportation (ICCT) reported that Alaska dropped from the most fuel-efficient U.S. airline in 2016 to a tie for fifth place in 2018. This shift was attributed to a combination of factors: • Increased Fuel Burn: Fuel burn per revenue passenger mile for Alaska's affiliates rose by 11%, and fuel burn per departure increased by 35% from 2016 to 2018. (https://theicct.org/wpcontent/uploads/2021/06/Domestic_Air_Efficiency_Ranking_2018_20190912_2. pdf?utm_source ) • Fleet Integration Challenges: The merger with Virgin America introduced Airbus A320 aircraft into Alaska's fleet, which were less fuel-efficient compared to Alaska's existing Boeing 737s. Despite these challenges, Alaska Airlines maintained a young and fuel-efficient fleet, achieving an average of 77.9 available seat miles per gallon in 2018. Fleet Modernization and Operational Enhancements Alaska Airlines continued its commitment to fleet modernization by investing in more fuel-efficient aircraft and technologies. The airline's focus on maintaining a young fleet contributed to reduced fuel consumption and lower greenhouse gas emissions. https://www.annualreports.com/HostedData/AnnualReportArchive/a/NYSE_ALK_2018. pdf?utm_source Sustainable Aviation Fuel (SAF) Initiatives In 2018, Alaska Airlines invested in sustainable aviation fuels as part of its broader sustainability strategy. While specific details of SAF usage in 2018 are limited, the airline's ongoing commitment to exploring alternative fuels underscores its dedication to reducing carbon emissions. Ground Operations and Infrastructure Electric Ground Support Equipment (eGSE) Alaska Airlines expanded its use of electric ground support equipment at SeattleTacoma International Airport (Sea-Tac), contributing to significant fuel savings and emissions reductions. The integration of eGSE helped the airline cut fuel consumption by 250,000 gallons and save $500,000 annually. (https://afdc.energy.gov/case/2329?utm_source ) Waste Reduction Initiatives The airline made notable strides in waste reduction by removing 22 million plastic straws and stir sticks from its operations. Additionally, Alaska Airlines improved inflight recycling programs, further demonstrating its commitment to environmental stewardship. https://www.responsibilityreports.com/HostedData/ResponsibilityReportArchive/a/NY SE_ALK_2018.pdf Carbon Emissions and Fuel Efficiency (2019) • Emissions Reduction: By 2019, Alaska Airlines achieved a 16% reduction in carbon emissions per revenue passenger mile compared to 2012 levels. This improvement was attributed to fleet modernization efforts and operational efficiencies, including the adoption of split scimitar winglets and advanced navigation technologies. (https://www.responsibilityreports.com/HostedData/ResponsibilityReportArchiv e/a/NYSE_ALK_2019.pdf?utm_source ) • Fuel Efficiency Ranking: The International Council on Clean Transportation (ICCT) recognized Alaska Airlines as one of the most fuel-efficient airlines globally. Fleet Modernization and Operational Enhancements • Winglet Installation: Alaska Airlines retrofitted its Boeing 737 fleet with split scimitar winglets, enhancing aerodynamic efficiency and contributing to fuel savings. • Navigation Technologies: The airline implemented advanced navigation technologies to optimize flight paths, reducing fuel consumption and associated emissions. Sustainable Aviation Fuel (SAF) Initiatives • SAF Commitment: In 2019, Alaska Airlines continued its commitment to sustainable aviation fuels, recognizing SAF as a critical component in reducing greenhouse gas emissions. The airline explored partnerships and investments to advance the development and adoption of SAF. Ground Operations and Infrastructure • Electric Ground Support Equipment (eGSE): Alaska Airlines expanded its use of electric ground support equipment, reducing emissions from ground operations and contributing to overall sustainability goals. • Waste Reduction Initiatives: The airline implemented comprehensive recycling and composting programs across its operations, aiming to divert waste from landfills and minimize environmental impact. Carbon Emissions and Fuel Efficiency • Net-Zero Commitment: Alaska Airlines pledged to achieve net-zero carbon emissions by 2040. This commitment encompasses five key focus areas: fleet renewal, operational efficiency, sustainable aviation fuel (SAF), novel propulsion technologies, and high-quality carbon offsetting. (https://aviationacrossamerica.org/news/2021/04/22/alaska-airlines-wants-toreach-net-zero-emissions-by-2040/?utm_source ) • Carbon Neutral Growth: The airline set a near-term target to maintain carbonneutral growth from 2019 levels through 2025, aligning with its broader sustainability roadmap. (https://news.alaskaair.com/alaska-airlines/alaskaairlines-net-zero-carbon-goals/?utm_source ) Fleet Modernization and Operational Enhancements • Boeing 737 MAX Integration: Alaska Airlines began integrating Boeing 737 MAX aircraft into its fleet. These aircraft offer a 22% improvement in fuel efficiency on a seat-by-seat basis compared to the models they replace • AI-Powered Flight Optimization: The airline implemented "Flyways," an artificial intelligence system developed by Airspace Intelligence, to optimize flight paths. During a six-month trial, Flyways reduced flight times and fuel consumption on 64% of flights, saving approximately 480,000 gallons of fuel and avoiding 4,600 tons of carbon emissions. Sustainable Aviation Fuel (SAF) Initiatives • SAF Development: Alaska Airlines continued to invest in the development and adoption of sustainable aviation fuels, recognizing SAF as a critical component in reducing lifecycle greenhouse gas emissions by up to 80% compared to conventional jet fuel. (https://www.twelve.co/post/alaska-airlines-multi-facetedapproach-to-becoming-more-sustainable?utm_source ) Ground Operations and Infrastructure • Electric Ground Support Equipment (eGSE): The airline expanded its use of electric ground support equipment, aiming to cut climate emissions from ground operations in half by 2025. • Waste Reduction Initiatives: Alaska Airlines maintained its industry-leading recycling program and continued to source more sustainable packaging for inflight services, contributing to overall waste reduction goals For a detailed overview of Alaska Airlines' sustainability initiatives in 2020, you can refer to their 2020 LIFT Sustainability Report. Carbon Emissions and Fuel Efficiency • Net-Zero Commitment: Alaska Airlines reaffirmed its pledge to achieve net-zero carbon emissions by 2040. This commitment encompasses five key focus areas: fleet renewal, operational efficiency, sustainable aviation fuel (SAF), novel propulsion technologies, and high-quality carbon offsetting. (https://news.alaskaair.com/alaska-airlines/alaska-airlines-net-zero-carbongoals/?utm_source ) • Carbon-Neutral Growth: The airline aimed to maintain carbon-neutral growth from 2019 levels through 2025, aligning with its broader sustainability roadmap. Fleet Modernization and Operational Enhancements • Boeing 737 MAX Integration: Alaska Airlines began integrating Boeing 737 MAX aircraft into its fleet. These aircraft offer a 22% improvement in fuel efficiency on a seat-by-seat basis compared to the models they replace. • AI-Powered Flight Optimization: The airline implemented "Flyways," an artificial intelligence system developed by Airspace Intelligence, to optimize flight paths. In 2021, Alaska Airlines became the first airline worldwide to adopt this technology, which helped save over 12,000 metric tons of CO₂, equivalent to 1.3 million gallons of fuel. Sustainable Aviation Fuel (SAF) Initiatives • SAF Development: Alaska Airlines continued to invest in the development and adoption of sustainable aviation fuels, recognizing SAF as a critical component in reducing lifecycle greenhouse gas emissions by up to 80% compared to conventional jet fuel. Ground Operations and Infrastructure • Electric Ground Support Equipment (eGSE): The airline expanded its use of electric ground support equipment, aiming to cut climate emissions from ground operations in half by 2025. • Waste Reduction Initiatives: Alaska Airlines reintroduced onboard recycling and became the first U.S. airline to deliver plastic-free onboard water service by adding recyclable paper cups. (https://news.alaskaair.com/alaskaairlines/alaska-airlines-2022-sustainability-report/?utm_source ) For a detailed overview of Alaska Airlines' sustainability initiatives in 2021, you can refer to their https://www.responsibilityreports.com/HostedData/ResponsibilityReportArchive/a/NY SE_ALK_2021.pdf Carbon Emissions and Fuel Efficiency • Net-Zero Commitment: Alaska Airlines reaffirmed its pledge to achieve net-zero carbon emissions by 2040. This commitment encompasses five key focus areas: operational efficiency, fleet renewal, sustainable aviation fuel (SAF), new aircraft technologies, and credible carbon removals where needed. (https://www.traveldailynews.com/aviation/alaska-airlines-2022-sustainabilityreport-shares-strides-forward-key-learnings-and-challengesfaced/?utm_source ) • Fleet Modernization: The airline improved the fuel efficiency of its fleet by 4.5% through the addition of 69 newer, more fuel-efficient planes. (https://www.thecommons.earth/blog/the-biggest-u-s-airlines-ranked-bysustainability-2023?utm_source ) Sustainable Aviation Fuel (SAF) Initiatives • SAF Procurement: Alaska Airlines increased its procurement of sustainable aviation fuel by 329% compared to the previous year. https://www.thecommons.earth/blog/the-biggest-u-s-airlines-ranked-bysustainability-2023?utm_source ) • Partnerships: The airline partnered with Twelve and Microsoft to advance the development of SAF, aiming to scale up production and usage. Ground Operations and Infrastructure • Electric Ground Support Equipment (eGSE): Alaska Airlines expanded its use of electric ground support equipment, aiming to cut climate emissions from ground operations in half by 2025. (https://news.alaskaair.com/alaskaairlines/alaska-airlines-net-zero-carbon-goals/?utm_source ) • Waste Reduction Initiatives: The airline implemented comprehensive recycling and composting programs across its operations, aiming to divert waste from landfills and minimize environmental impact. For a detailed overview of Alaska Airlines' sustainability initiatives in 2022, you can refer to their 2022 Sustainability Report. If you need this information formatted into a professional document or require further details on specific initiatives, feel free to ask! Carbon Emissions and Fuel Efficiency • Carbon Emissions Reduction: Alaska Airlines achieved a 9% reduction in carbon emissions compared to 2022 levels. (https://sustainabilityreports.com/reports/alaska-air-group-inc-2023sustainability-report-pdf/?utm_source ) • Net-Zero Commitment: The airline reaffirmed its goal to achieve net-zero carbon emissions by 2040, focusing on operational efficiency, fleet modernization, sustainable aviation fuels (SAF), new technologies, and highquality carbon removals. (https://www.alaskaair.com/content/aboutus/esg/evergreen?utm_source ) Fleet Modernization and Operational Enhancements • Fleet Renewal: Alaska Airlines continued integrating more fuel-efficient aircraft into its fleet, contributing to overall emissions reductions. • AI-Powered Flight Optimization: The airline expanded the use of artificial intelligence systems to optimize flight paths, reducing fuel consumption and associated emissions. Sustainable Aviation Fuel (SAF) Initiatives • SAF Procurement: Alaska Airlines increased its procurement of sustainable aviation fuel, recognizing SAF as a critical component in reducing lifecycle greenhouse gas emissions. • Partnerships: The airline partnered with climate-tech company CHOOOSE to provide options for guests to purchase SAF credits or support nature-based climate projects. (https://news.alaskaair.com/sustainability/alaska-airlines-partners-withchooose-to-empower-guests-to-reduce-emissions-and-support-growth-of-thesustainable-aviation-fuel-market/?utm_source) Ground Operations and Infrastructure • Electric Ground Support Equipment (eGSE): Alaska Airlines expanded its use of electric ground support equipment, aiming to cut climate emissions from ground operations in half by 2025. • Waste Reduction Initiatives: The airline implemented comprehensive recycling and composting programs across its operations, aiming to divert waste from landfills and minimize environmental impact. For a detailed overview of Alaska Airlines' sustainability initiatives in 2023, you can refer to their https://news.alaskaair.com/wp-content/uploads/2024/08/Alaska-AirlinesSustainability-Report-2023.pdf?utm_source Carbon Emissions and Fuel Efficiency • Net-Zero Commitment: Alaska Airlines reaffirmed its goal to achieve net-zero carbon emissions by 2040, emphasizing operational efficiency, fleet modernization, sustainable aviation fuels (SAF), new technologies, and highquality carbon removals. • Sustainable Aviation Fuel (SAF) Investment: In 2024, the airline invested in over 7 million gallons of SAF, significantly increasing its use compared to previous years. (https://news.alaskaair.com/company/2024-year-inreview/?utm_source ) Fleet Modernization and Operational Enhancements • AI-Powered Flight Optimization: Alaska Airlines renewed its partnership with Airspace Intelligence to utilize the Flyways AI platform, optimizing flight paths to reduce fuel consumption and emissions. (https://news.alaskaair.com/company/2024-year-in-review/?utm_source ) • Fleet Renewal: The airline continued integrating more fuel-efficient aircraft into its fleet, contributing to overall emissions reductions. Sustainable Aviation Fuel (SAF) Initiatives • Guest Participation in SAF: Alaska Airlines introduced options for guests to contribute to SAF purchases during booking, allowing them to offset 5%, 10%, or 20% of their flight's estimated carbon emissions. (https://www.chooose.today/resources/news-updates/alaska-airlinesempowers-guests-to-support-sustainable-aviation-fuel-while-bookingflights?utm_source ) • Loyalty Program Incentives: Mileage Plan™ members could earn elite-qualifying miles by supporting SAF, receiving 500 EQMs for every $100 spent, up to 5,000 EQMs per year. (https://www.chooose.today/resources/news-updates/alaskaairlines-empowers-guests-to-support-sustainable-aviation-fuel-while-bookingflights?utm_source ) Ground Operations and Infrastructure • Electric Ground Support Equipment (eGSE): Alaska Airlines expanded its use of electric ground support equipment, aiming to cut climate emissions from ground operations in half by 2025. • Waste Reduction Initiatives: The airline implemented comprehensive recycling and composting programs across its operations, aiming to divert waste from landfills and minimize environmental impact. For a detailed overview of Alaska Airlines' sustainability initiatives in 2024, you can refer to their https://news.alaskaair.com/company/2024-year-in-review/

Alaska Airlines Sustainability Report 2008-2024

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