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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantþ
Filed by a Party other than the Registranto
Check the appropriate box:
þ | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
Alaska Air Group, Inc.
Payment of Filing Fee (Check the appropriate box): | ||||
þ | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: | |||
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: | |||
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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• | you can vote over the Internet, by telephone, by mail, or at the meeting; | |
• | you can use any of these means to change your vote and thereby revoke any earlier vote; and | |
• | voting by proxy will not prevent you from attending the meeting, but it will ensure that your vote will be counted if you are unable to attend the meeting. | |
Sincerely, | |
William S. Ayer | |
Chairman and Chief Executive Officer |
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1. To elect four directors for three-year terms. | |
2. To consider and vote on the six stockholder proposals described in the accompanying proxy statement, if those proposals are properly presented at the meeting. | |
3. To transact such other business as may properly come before the meeting or any adjournment thereof. |
By Order of the Board of Directors, | |
Keith Loveless | |
General Counsel & Corporate Secretary | |
April 11, 2005 |
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• | FOR the Board’s director nominees, and | |
• | AGAINST the other proposals. | |
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• | in a brokerage account can vote by using the voting instruction form provided by the broker or by telephone or the Internet. | |
• | by a bank and have the power to vote or to direct the voting of the shares can vote using the proxy or the voting information form provided by the bank and, if made available by the bank, telephone and/or Internet voting. | |
• | in trust under an arrangement that provides the beneficial owner with the power to vote or to direct the voting of the shares can vote in accordance with the provisions of such arrangement. | |
• | in trust in one of the Company’s 401(k) retirement plans or employee stock purchase plans can vote using the voting instruction form provided by the trustee or by telephone or Internet. |
You may vote on the Internet. |
You may vote by phone. |
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You may vote by mail. |
• | voting by telephone or on the Internet (which may not be available to some beneficial holder) before 11:59 p.m. Eastern Time on May 16, 2005 (your latest telephone or Internet proxy is counted), | |
• | signing and delivering a proxy card with a later date, or | |
• | voting at the meeting. (If you hold your shares beneficially through a broker, you must bring a legal proxy from the record holder in order to vote at the meeting.) |
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Director | ||||||||||
Name | Principal Occupation or Employment and Other Business Affiliations | Age | Since | |||||||
Phyllis J. Campbell | Mrs. Campbell has been a director since 2002 and serves on the Company’s Compensation and Safety Committees. She is President and CEO of The Seattle Foundation. She was President of U.S. Bank of Washington from 1993 until 2001 and has served as Chair of the Bank’s Community Board. She also is on the boards of Alaska Airlines, Nordstrom, SAFECO Corporation and Puget Energy, and is a member of the Board of Trustees of Seattle University. | 53 | 2002 | |||||||
Mark R. Hamilton | Mr. Hamilton has been a director since 2001 and serves on the Company’s Audit and Safety Committees, as well as on the board of Horizon Air. He has served as President of the University of Alaska since 1998. That same year, he retired as a U.S. Army Major General following 31 years of active military duty, primarily in the fields of teaching, management and administration. Formerly, Mr. Hamilton was Chief of Staff of the Alaskan Command at Elmendorf Air Force Base and Commander of Division Artillery at Fort Richardson. Mr. Hamilton is a graduate of the U.S. Military Academy at West Point and is the recipient of the Army’s highest peacetime award, the Distinguished Service Medal. | 59 | 2001 | |||||||
Byron I. Mallott | Mr. Mallott has been a director since 1982 and is Chairman of the Company’s Audit Committee. He is President of the First Alaskans Institute (a nonprofit organization dedicated to the development of Alaska Native peoples and their communities). From 1995 to 1999, he served as Executive Director (chief executive officer) of the Alaska Permanent Fund Corporation, a trust managing proceeds from the state of Alaska’s oil revenues. He was a director of Sealaska Corporation, Juneau, Alaska, from 1972 to 1988, Chairman from 1976 to 1983, and Chief Executive Officer from 1982 to 1992. He owns Mallott Enterprises (personal investments) and is a director of Alaska Airlines, Sealaska Corporation and the Alaska Communications Systems Group Incorporated. | 61 | 1982 |
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Director | ||||||||||
Name | Principal Occupation or Employment and Other Business Affiliations | Age | Since | |||||||
Richard A. Wien | Mr. Wien has been a director since 1982. He serves on the Company’s Audit Committee and is Chairman of the Safety Committee. Mr. Wien played an active role in the management of Wien Airlines until 1969, when he was elected President of Merric, Inc., an Alaska helicopter contract and charter service company. After Merric merged with Era Aviation in 1973, Mr. Wien served as Era’s Executive Vice President until 1981. He has been Chairman and Chief Executive Officer of Florcraft, Inc. (retail flooring), Fairbanks and Anchorage, Alaska, since 1986. He is also a director of Alaska Airlines and Usibelli Coal Mine. | 69 | 1982 | |||||||
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE DIRECTOR NOMINEES. |
Director | ||||||||||
Name | Principal Occupation or Employment and Other Business Affiliations | Age | Since | |||||||
Patricia M. Bedient | Ms. Bedient was appointed to the Board of Directors in December 2004. She is Vice President of Strategic Planning for Weyerhaeuser, one of the world’s largest integrated forest products companies. A certified public accountant, she served as the managing partner of Arthur Andersen LLP’s Seattle office prior to joining Weyerhaeuser. Ms. Bedient also worked at the firm’s Portland and Boise offices as a partner and as a CPA during her 27-year career with Andersen. Ms. Bedient is on the Oregon State University Foundation Board of Trustees, the Weyerhaeuser Foundation Board and the advisory board of the University of Washington School of Business. She has also served on the boards of a variety of civic organizations, including the World Forestry Center, the City Club of Portland, St. Mary’s Academy of Portland and the Chamber of Commerce of Boise, Idaho. She is a member of the American Institute of CPAs and the Washington Society of CPAs. | 51 | 2004 | |||||||
Bruce R. Kennedy | Mr. Kennedy has been a director since 1972 and serves as Chairman of the Governance and Nominating Committee. He is Chairman Emeritus of Alaska Air Group and served as its Chairman, Chief Executive Officer and President from 1985 to 1991. He was also Chairman of Alaska Airlines from 1979 to 1991, Chief Executive Officer from 1979 to 1990 and President from 1978 to 1990. He is on the board of directors of Horizon Air and serves as Chairman of Quest Aircraft Trust, an aircraft design and manufacturing company. | 66 | 1972 |
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Director | ||||||||||
Name | Principal Occupation or Employment and Other Business Affiliations | Age | Since | |||||||
Jessie J. Knight, Jr. | Mr. Knight has been a director since 2002 and serves on the Compensation Committee and the Governance and Nominating Committee. He is the President and Chief Executive Officer of the San Diego Regional Chamber of Commerce, an organization whose primary focus is economic development. Before assuming his current position in 1999, Mr. Knight served from 1993 through 1998 as a commissioner of the California Public Utilities Commission, which is responsible for the regulatory oversight of all energy, telecommunications, shipping, railroad and investor-owned utilities in the state. Mr. Knight is also on the board of directors of Alaska Airlines, Avista Corporation and Environmental Power Corporation and is a standing member of the Council on Foreign Relations. | 54 | 2002 | |||||||
J. Kenneth Thompson | Mr. Thompson has been a director since October 1999 and serves on the Company’s Governance and Nominating Committee and its Safety Committee. He served as executive vice president of ARCO’s Asia Pacific oil and gas operating companies in Alaska, California, Indonesia, China and Singapore from 1998 to 2000. Prior to that, he was President of ARCO Alaska, Inc., the parent company’s oil and gas producing division based in Anchorage. Mr. Thompson is President and CEO of Pacific Star Energy LLC, a natural gas pipeline company in Alaska. He is also managing partner of Alaska Venture Capital Group and Chairman of AVCG’s oil and gas exploration subsidiary, Brooks Range Petroleum Corporation, which are private companies. He is on the board of directors of Coeur d’Alene Mines Corporation, Horizon Air, and a number of community service organizations. | 53 | 1999 |
Director | ||||||||||
Name | Principal Occupation or Employment and Other Business Affiliations | Age | Since | |||||||
William S. Ayer | Mr. Ayer has been a director since 1999. He is Chairman, President and CEO of Alaska Air Group and Alaska Airlines and Chairman of Horizon Air. He served as Alaska Airlines’ president and chief operating officer from November 1997 to January 2002. Prior to that, he served in various marketing, planning and operational capacities with Horizon Air, including Senior Vice President, Operations. Mr. Ayer serves on the boards of Alaska Airlines, Puget Energy, Angel Flight, the Alaska Airlines Foundation, the University of Washington Business School Advisory Board and the Museum of Flight. | 50 | 1999 | |||||||
Dennis F. Madsen | Mr. Madsen has been a director since 2003 and serves on the Compensation and Safety Committees. He was President and CEO of Recreational Equipment, Inc. (REI), a retailer and online merchant for outdoor gear and clothing through March 2005. He served as REI’s Executive Vice President and Chief Operating Officer from 1987 to 2000 and has held numerous positions throughout the Company. Mr. Madsen also serves on the boards of Alaska Airlines, the Western Washington University Foundation, Western Washington University and the Washington Roundtable. | 56 | 2003 |
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Director | ||||||||||
Name | Principal Occupation or Employment and Other Business Affiliations | Age | Since | |||||||
R. Marc Langland | Mr. Langland has been a director since 1991. He is a member of the Company’s Governance and Nominating Committee and Chairman of the Compensation Committee. He has been President of Northrim Bank, Anchorage, Alaska, since November 1990 and Chairman since January 1998. Mr. Langland has also been Chairman, President and CEO of its parent company, Northrim BanCorp, Inc., since December 2001. He was Chairman and Chief Executive Officer of Key Bank of Alaska from 1987 to 1988 and President from 1985 to 1987. He served on the Board of Trustees of the Alaska Permanent Fund Corporation from February 1987 to January 1991 and was Chairman from June 1990 to January 1991. He is also a director of Horizon Air, Northrim BanCorp, Inc., Saltchuk Resources and Usibelli Coal Mine, and is a member of the Anchorage Chamber of Commerce. | 63 | 1991 | |||||||
John V. Rindlaub | Mr. Rindlaub has been a director since 1996 and serves on the Company’s Audit and Compensation Committees. He is CEO, Pacific Northwest Region, Wells Fargo Bank. Prior to joining Wells Fargo, he held a number of positions with Bank of America between 1989 and 2001, including President, Bank of America, Northwest and Chairman of Seafirst Bank. Prior to his position at Seafirst, Mr. Rindlaub was Group Executive Vice President/Asia Division for Bank America and a managing director for Bankers Trust Company New York, Investment Banking Group. He is also a director of Horizon Air, Saltchuk Resources, Inc., Washington Roundtable and the Greater Seattle Chamber of Commerce. | 60 | 1996 |
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Governance and | ||||||||||||||||
Name | Audit | Compensation | Nominating | Safety | ||||||||||||
Patricia M. Bedient | ||||||||||||||||
Phyllis J. Campbell | x | x | ||||||||||||||
Mark R. Hamilton | x | x | ||||||||||||||
Bruce R. Kennedy | x | * | ||||||||||||||
Jessie J. Knight, Jr. | x | x | ||||||||||||||
R. Marc Langland | x | * | x | |||||||||||||
Byron I. Mallott | x | * | ||||||||||||||
Dennis F. Madsen | x | x | ||||||||||||||
John V. Rindlaub | x | x | ||||||||||||||
J. Kenneth Thompson | x | x | ||||||||||||||
Richard A. Wien | x | x | * |
* | Committee chair |
• | appoint them and oversee their work; | |
• | review at least annually their statement regarding their internal quality-control procedures and their relationship with the Company; | |
• | maintain a dialogue with respect to their independence; | |
• | pre-approve all auditing and non-auditing services they are to perform; | |
• | review annual and quarterly financial statements and filings made with the SEC; and | |
• | receive and review communications required from the independent auditors under applicable rules and standards. |
• | review financial risk and associated internal controls; | |
• | review procedures with respect to significant accounting policies and the adequacy of financial controls; | |
• | discuss with management, as appropriate, earnings releases and any information provided to analysts and rating agencies; | |
• | develop and monitor a Corporate Compliance program, including a Code of Conduct and Ethics, decide on requested changes to or waivers of such program and code relating to officers and directors, and establish procedures for confidential treatment of complaints concerning accounting, internal controls or auditing matters; and |
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• | obtain and review at least quarterly a statement from the CEO, CFO and Disclosure Committee disclosing any significant deficiencies in internal controls and any fraud that involves management or other employees with significant roles in internal controls. |
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• | Audit Committee — 8 | |
• | Compensation Committee — 8 | |
• | Governance and Nominating Committee — 4 | |
• | Safety Committee — 4 |
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a. the receipt by a director of retirement compensation earned under one or more tax-qualified or nonqualified plans during the director’s employment with the Company; | |
b. ordinary-course business between the Company and an organization of which the Board member is an officer or director, where the amount of such business is immaterial with respect to the Company’s or the organization’s annual revenues; or | |
c. the receipt of cash or in-kind contributions from the Company by a tax-exempt charitable organization of which the Board member is an officer or director, the value of which is immaterial with respect to the Company’s or the charitable organization’s annual revenues. |
a. General Nomination Right of All Stockholders |
• | The name and address of the stockholder who intends to make the nomination and of the person(s) to be nominated; | |
• | A representation that the stockholder of record is entitled to vote at the meeting; |
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• | A description of all arrangements or understandings between the stockholder and each nominee and any other person(s) (naming them) pursuant to which the nomination is to be made; | |
• | Other information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated by the Board of Directors; and | |
• | The consent of each nominee to serve as a Director if elected. |
b. Consideration of Director Candidates Recommended by Stockholders |
c. Initial Consideration of Candidates Recommended by Qualified Stockholders |
• | Proof of the required stock ownership (including the required holding period) of the stockholder or group of stockholders. The Committee may determine whether the required stock ownership condition has been satisfied for any stockholder that is the registered owner. Any stockholder that is not the registered stockholder must submit such evidence as the Committee deems reasonable to evidence the required ownership percentage and holding period. | |
• | A written statement that the stockholder intends to continue to own the required percentage of shares through the date of the annual meeting with respect to which the candidate is nominated. | |
• | The name or names of each stockholder submitting the proposal, the name of the candidate, and the written consent of each such stockholder and the candidate to be publicly identified. | |
• | Regarding the candidate, such person’s name, age, business and residence addresses, principal occupation or employment, number of shares of the Company’s stock, if any, beneficially owned, a |
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written resume or curriculum vitae of personal and professional experiences, and all other information relating to the candidate that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder (the “Exchange Act”). | ||
• | Regarding the candidate, information, documents or affidavits demonstrating to what extent the candidate meets the required minimum criteria, and the desirable qualities or skills, established by the Committee. The Notice must also include a written statement that the stockholder submitting the proposal and the candidate will make available to the Committee all information reasonably requested in furtherance of the Committee’s evaluation of the candidate. | |
• | Regarding the stockholder submitting the proposal, the person’s business address and contact information and any other information that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act. | |
• | The signature of each candidate and of each stockholder submitting the proposal. |
Board of Directors | |
Alaska Air Group, Inc. | |
PO Box 68947 | |
Seattle, WA 98168 |
d. Initial Consideration of Candidates Recommended by Other Stockholders |
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Board of Directors | |
Alaska Air Group, Inc. | |
PO Box 68947 | |
Seattle, WA 98168 |
• | forward the communication to the director or directors to whom it is addressed (for example, if the communication received deals with questions, concerns or complaints regarding accounting, internal accounting controls and auditing matters, it will be forwarded by management to the Chairman of the Audit Committee for review); | |
• | attempt to handle the inquiry directly (for example, where it is a request for information about us or our operations or it is a stock-related matter that does not appear to require direct attention by our board of directors or an individual director); or | |
• | not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. |
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• | an annual retainer of $20,000, with a minimum of 25% of the retainer paid in the form of Alaska Air Group common stock issued under the Company’s 2004 Long Term Incentive Plan. (In connection with this practice, the Board has set stock ownership guidelines for directors.) Beginning in June 2005, the annual retainer will increase to $30,000, $15,000 (or 50%) of which will be paid in common shares. The increase in retainer follows a market comparison by Watson Wyatt that showed that Alaska directors were significantly lagging their counterparts in overall compensation and, in particular, in the stock component of their pay. | |
• | $2,000 for each Audit Committee meeting and $1,200 for each Board or other committee meeting in which a nonemployee director participated in person, or $750 if participation was via telephone; | |
• | $500 for participation in telephone updates that occur between meetings; | |
• | an annual retainer of $4,000 to the Audit Committee chairperson and $2,000 to other committee chairpersons; | |
• | an annual retainer of $1,000 to nonemployee directors who served on the Board of Directors of Alaska Airlines or Horizon Air; and | |
• | reimbursement of expenses in connection with attending Board and committee meetings as well as expenses in connection with director education. |
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• | In connection with its audit of Air Group’s consolidated financial statements for the year ended December 31, 2003, Deloitte advised the Audit Committee of two matters related to its internal controls that Deloitte considered to be reportable conditions under standards established by the American Institute of Certified Public Accountants. First, Deloitte noted that although the company reconciles its balance sheet accounts regularly, and those reconciliations are reviewed by someone other than the preparer, the Company should improve its process of analyzing the underlying account detail. Second, Deloitte noted that Horizon was not reconciling its inventory of expendable parts on a timely basis. | |
• | In connection with its audit of Air Group’s consolidated financial statements for the year ended December 31, 2002, Deloitte advised the Audit Committee of one matter that Deloitte considered to be a reportable condition. Deloitte noted design deficiencies specific to password controls in the Peoplesoft application software and the security configuration of the Peoplesoft Financials application. |
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Deloitte & | |||||||||||||
Touche | |||||||||||||
2004 | LLP | KPMG LLP | Total 2004 | ||||||||||
Audit Fees for the Company’s Annual Financial Statements and Quarterly Reviews(1) | $ | 467,000 | $ | 1,339,000 | $ | 1,806,000 | |||||||
Audit-Related Fees(2) | 176,000 | — | 176,000 | ||||||||||
Tax Fees(3) | 67,000 | 52,314 | 119,314 | ||||||||||
All Other Fees(4) | 26,000 | — | 26,000 | ||||||||||
Total Fees for 2004 | $ | 736,000 | $ | 1,391,314 | $ | 2,127,314 |
2003 | Total 2003 | ||||||||||||
Audit Fees for the Company’s Annual Financial Statements and Quarterly Reviews | $ | 892,000 | — | $ | 892,000 | ||||||||
Audit-Related Fees(2) | 247,000 | — | 247,000 | ||||||||||
Tax Fees(3) | 48,000 | — | 48,000 | ||||||||||
All Other Fees(4) | 39,000 | — | 39,000 | ||||||||||
Total Fees for 2003 | $ | 1,226,000 | $ | 1,226,000 |
(1) | Audit fees paid in 2004 include, for the first time, the annual audit of internal controls as mandated under Sarbanes Oxley Section 404, which accounts for a significant portion of the fee increase over 2003. |
(2) | Includes fees paid in connection with the audit of Air Group’s employee benefit plans. Also includes fees for professional services in connection with the private placement and registration of our $150 million convertible notes. |
(3) | Fees for professional services in connection with tax consulting, planning and tax return review. Substantially all of the tax fees paid to Deloitte & Touche were paid after their dismissal as our principal auditor. The tax fees paid to KPMG with the exception of $22,000 in connection with one specific project were paid prior to their appointment as our principal auditor. |
(4) | Fees for professional services in connection with (i) the audit of security costs incurred as reported to the Transportation Security Administration, (ii) the audit of passenger facility charges and examination of related controls, (iii) the examination of agreed-upon procedures for the U.S. Citizenship and Immigration Services, and (iv) the audit of airport improvement fees and examination of related controls. |
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• | the aggregate amount of fees paid for all such non-audit services is not more than 5 percent of the total fees paid by the Company to its auditor during the fiscal year in which the non-audit services are provided; | |
• | such services were not recognized by the Company at the time of the engagement to be non-audit services; and | |
• | such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit. |
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Audit Committee of the Board of Directors | |
Byron I. Mallott, Chairperson | |
Mark R. Hamilton, Member | |
John V. Rindlaub, Member | |
Richard A. Wien, Member |
• | may vote or invest alone, | |
• | holds with his or her spouse, with shared voting and investment power, | |
• | holds otherwise with shared voting and investment power, | |
• | holds in one of the Company’s 401(k) plans, or | |
• | may acquire through stock option exercises through June 10, 2005. |
Options | ||||||||||||||||||||
Shares | Exercisable | Stock | Percent of | |||||||||||||||||
Beneficially | within | Units and | Outstanding | |||||||||||||||||
Nonemployee Directors and Nominees | Owned(a) | 60 Days | Interests(b) | Total | Shares | |||||||||||||||
Patricia M. Bedient | 90 | — | 90 | |||||||||||||||||
Phyllis J. Campbell | 1,514 | — | 1,514 | |||||||||||||||||
Mark R. Hamilton | 635 | — | 635 | |||||||||||||||||
Bruce R. Kennedy | 9,844 | — | 9,844 | |||||||||||||||||
Jessie J. Knight, Jr. | 403 | — | 403 | |||||||||||||||||
R. Marc Langland | 4,070 | — | 4,070 | |||||||||||||||||
Dennis F. Madsen | 946 | — | 946 | |||||||||||||||||
Byron I. Mallott | 2,462 | — | 2,462 | |||||||||||||||||
John V. Rindlaub | 4,857 | — | 4,857 | |||||||||||||||||
J. Kenneth Thompson | 3,761 | — | 3,761 | |||||||||||||||||
Richard A. Wien | 4,855 | — | 4,855 |
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Options | ||||||||||||||||||||
Shares | Exercisable | Stock | Percent of | |||||||||||||||||
Beneficially | within | Units and | Outstanding | |||||||||||||||||
Executive Officers | Owned(a) | 60 Days | Interests(b) | Total | Shares | |||||||||||||||
William S. Ayer | 10,329 | 354,725 | 15,400 | 380,454 | 1.4 | |||||||||||||||
George D. Bagley | 1,039 | 221,400 | 6,690 | 229,129 | ||||||||||||||||
Gregg A. Saretsky | 1,224 | 104,976 | 5,570 | 111,770 | ||||||||||||||||
Bradley D. Tilden | 2,588 | 88,850 | 5,350 | 96,788 | ||||||||||||||||
Keith Loveless | — | 63,375 | 3,680 | 67,055 | ||||||||||||||||
Jeffery D. Pinneo | 3,242 | 60,275 | 4,870 | 68,387 | ||||||||||||||||
Glenn S. Johnson | 3,473 | 39,600 | 3,230 | 46,303 | ||||||||||||||||
Brandon Pederson | — | 2,975 | 1,690 | 4,665 | ||||||||||||||||
All directors and all executive officers as a group (19 persons) | 55,332 | 936,176 | 46,480 | 1,034,577 | 3.8 |
(a) | Consists of the aggregate total of shares of common stock held by the reporting person either directly or indirectly, including 401(k) plan holdings. |
(b) | Consists of the aggregate total of RSUs (Restricted Stock Units) granted in 2004, which will vest November 10, 2007. |
Number of | Percent of | ||||||||
Shares | Outstanding | ||||||||
Name and Address | Owned | Shares | |||||||
Vanguard PRIMECAP Fund(1) | 2,540,000 | 9.4 | |||||||
100 Vanguard Boulevard | |||||||||
Malvern, PA 19355 | |||||||||
Donald Smith & Co., Inc.(2) | 2,531,000 | 9.3 | |||||||
152 West 57th Street | |||||||||
New York, NY 10019 | |||||||||
Dimensional Fund Advisors Inc.(3) | 2,131,000 | 7.9 | |||||||
1299 Ocean Avenue, 11th Floor | |||||||||
Santa Monica, CA 90401 | |||||||||
Franklin Resources, Inc.(4) | 1,852,013 | 6.8 | |||||||
One Franklin Parkway | |||||||||
San Mateo, CA 94403-1906 | |||||||||
Alaska Airlines, Inc. and Horizon Air Industries, | 1,577,856 | 5.8 | |||||||
Inc. Employee 401(k) Plans(5) | |||||||||
c/o Vanguard Fiduciary Trust Company | |||||||||
500 Admiral Nelson Blvd. | |||||||||
Malvern, PA. 19355 | |||||||||
Barclay’s Global Investors, NA(6) | 1,591,930 | 5.9 | |||||||
45 Fremont Street | |||||||||
San Francisco, CA 94105 |
(1) | Information is based on a Schedule 13G filed by Vanguard PRIMECAP Fund (“Vanguard”) on February 14, 2005. Vanguard reported in the Schedule 13G that it had sole voting power over all 2,540,000 shares. |
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(2) | Information is based on a Schedule 13G filed by Donald Smith & Co., Inc. (“Donald Smith”) on February 9, 2005. Donald Smith reported in the Schedule 13G that it had sole voting power over 2,227,300 of the shares. |
(3) | Information is based on a Schedule 13G filed by Dimensional Fund Advisors Inc. (“Dimensional”) on February 9, 2005. Dimensional reported in the Schedule 13G that it furnishes investment advice to four investment companies and serves as investment manager to other accounts, which hold the shares shown in the table above. It further reported that while it possesses voting and investment power over such shares, they are owned by the Funds, and Dimensional disclaims beneficial ownership of such shares. |
(4) | Information is based on a Schedule 13G filed by Franklin Resources, Inc. (“FRI”) on February 11, 2005. The Schedule 13G reported that the shares covered are owned by accounts advised by FRI’s advisory subsidiaries. FRI, the advisory subsidiaries, Charles B. Johnson and Rupert H. Johnson, who are FRI’s principal stockholders, collectively, have sole voting power over all 1,852,013 shares. |
(5) | Vanguard Fiduciary Trust Company is trustee of the Alaska Air Group, Inc. Alaskasaver Plan, the Alaska Airlines, Inc. Flight Attendant 401(k) Plan, the Alaska Airlines, Inc. COPS, MRP and Dispatch 401(k) Plan, the Horizon Air Industries, Inc. Savings Investment Plan and the Horizon Air Industries, Inc. Supplemental Savings Plan. The plan trustee votes shares allocated to participants as directed by participants, subject to Section 404 of ERISA. As of December 31, 2004, all 1,577,856 shares had been allocated to employees. |
(6) | Information is based on a Schedule 13G filed by Barclay’s Global Accounting on February 14, 2005. The Schedule 13G reported that the shares covered are owned by accounts advised by Barclay’s advisory subsidiaries: Barclay’s Global Investors, Barclay’s Global Fund Advisors, Barclay’s Capital Securities Ltd, Barclay’s Capital, Inc. and Palomino Ltd. The advisory subsidiaries, collectively, have sole voting power over all 1,591,930 shares. |
• | a report by the Compensation Committee on executive compensation, | |
• | a graph showing comparative performance of the common stock, | |
• | a detailed table showing compensation for the years 2004, 2003 and 2002, and | |
• | information about stock options and retirement benefits. |
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• | determining the compensation of the Chief Executive Officer of the Company, | |
• | upon recommendation of the Chief Executive Officer, reviewing and approving all other elected officers’ compensation, and | |
• | granting awards under stock incentive plans. |
1. establishing objectives for compensation, | |
2. defining appropriate competitive reference points, | |
3. creating an appropriate linkage between compensation programs and Company objectives and values, | |
4. describing the roles of various elements of compensation, and | |
5. maintaining good governance practices concerning compensation. |
• | to attract and retain highly qualified executives by designing the total compensation package to be in line with our competitive reference points, | |
• | to motivate executives to provide excellent leadership and achieve Company goals by linking merit-based base salary adjustments and short-term incentives to the achievement of specific annual goals as reflected in executives’ commitment plans and the Performance Based Pay Plan, | |
• | to link the interests of executives and stockholders by tying a large portion of total compensation to Company operational performance, profitability and stock value, | |
• | to link the interests of executives and employees by establishing common operational and financial goals for short-term incentive payouts, and | |
• | to provide executives with reasonable security, through a combination of retirement plans, employment and/or change-in-control agreements and performance-based incentives that motivate them to achieve goals that will make the Company thrive and remain competitive in the long run. |
• | a group of eight larger and four smaller air carriers, including the Company’s primary competitors and the majority of the companies included in the Dow Jones Airlines Group contained in the Performance Graph on page 31. | |
• | other companies in a broad-based 2004 national compensation survey compiled by Watson Wyatt, the compensation consultant retained by the Compensation Committee. |
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$(000s) | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||
Base Salary | ||||||||||||||||||||||||
Cross Industry(1) | 586.6 | 601.5 | 623.8 | 650.5 | 701.3 | 655.8 | ||||||||||||||||||
Airline Industry(2) | 510.0 | 611.0 | 506.0 | 564.0 | 507.0 | (3 | ) | |||||||||||||||||
Alaska Air | 511.0 | 518.0 | 525.0 | 525.0 | 374.0 | 369.0 | ||||||||||||||||||
Total Cash | ||||||||||||||||||||||||
Cross Industry | 956.5 | 960.6 | 1,051.7 | 997.9 | 1,199.0 | 1,170.0 | ||||||||||||||||||
Airline Industry | 1,027.0 | 1,253.0 | 698.0 | 876.0 | 682.0 | (3 | ) | |||||||||||||||||
Alaska Air | 886.0 | 518.0 | 525.0 | 637.0 | 473.0 | 479.3 | ||||||||||||||||||
Total Compensation(3) | Including long-term equity incentives valued at the time of award using a Black-Scholes factor of .50 for all companies, total compensation for Alaska Air’s CEO lagged the airline industry comparison group (described in footnote 2) by an average of 54 percent over the five years for which data was available (1999-2003), and it lagged cross-industry comparisons by an average of 40 percent over that same period. |
$(000s) | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||
Base Salary | ||||||||||||||||||||||||
Cross Industry | 298.2 | 309.6 | 315.6 | 330.8 | 373.0 | 356.5 | ||||||||||||||||||
Airline Industry | 382.0 | 417.0 | 413.0 | 404.0 | 373.0 | (3) | ||||||||||||||||||
Alaska Air | 303.0 | 300.0 | 307.0 | 340.0 | 278.0 | 286.0 | ||||||||||||||||||
Total Cash | ||||||||||||||||||||||||
Cross Industry | 450.6 | 463.3 | 484.1 | 441.0 | 580.4 | 562.0 | ||||||||||||||||||
Airline Industry | 948.0 | 779.0 | 538.0 | 614.0 | 504.0 | (3) | ||||||||||||||||||
Alaska Air | 500.0 | 300.0 | 307.0 | 399.0 | 358.0 | 350.0 | ||||||||||||||||||
Total Compensation(3) | Including long-term equity incentives valued at the time of award using a Black-Scholes factor of .50 for all companies, total average compen-sation for Alaska Air’s Top Five Executives lagged the airline industry comparison group by an average of 51 percent over the five years for which data was available (1999-2003), and it lagged cross-industry comparisons by an average of 10 percent over that same period. |
(1) | Cross Industry Group includes over 1,000 companies from a wide variety of industries (excluding the financial industry). Comparisons were based on the position responsibilities of Alaska Airlines positions. Values were calculated using regression analysis based on the companies’ actual revenues for each year. |
(2) | Airline Industry Group includes the following 12 airlines: Airtran Holdings, America West Holdings, AMR, ATA Holdings, Continental Airlines, Delta Air Lines, Frontier Airlines, JetBlue Airways, Northwest Airlines, Southwest Airlines, UAL and US Airways Group. These airlines vary somewhat from the airlines included in the Performance Graph. This group of companies was chosen for purposes of executive compensation comparison because it is the same group of carriers used by the Company when |
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evaluating comparative market wage rates for other employee groups. Data reflects average values for the group of airlines. | |
(3) | 2005 proxy data (2004 actual pay data) for the group of airlines was not available when this report was conducted. |
• | an analysis of competitive market rates including other airlines as well as cross-industry comparisons, | |
• | the market demand for each executive officer’s skills, | |
• | the executive’s influence on long-term Company strategies and success, | |
• | the relationships among executive positions, and | |
• | individual leadership performance. |
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* | Recognizing that achievement of the 2005 competitive unit cost goals (expressed as cost per available seat mile, or CASM) will require that wages for various employee groups be reduced to current market levels, the named executive officers of Alaska Airlines have decided to voluntarily donate to the Alaska Airlines Employee Assistance Fund any payout related to the achievement of CASM goals under the 2005 PBP. |
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• | the Company’s financial performance, | |
• | overall leadership, | |
• | strategic and succession planning, | |
• | communication to the Board and other Company constituencies, | |
• | investor relations, | |
• | the CEO’s relationship with the Board, | |
• | achievement of safety and compliance goals, and | |
• | achievement of objectives in individual commitment plans. |
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Compensation Committee of the Board of Directors | |
R. Marc Langland, Chairperson | |
Phyllis J. Campbell, Member | |
Jessie J. Knight, Jr., Member | |
Dennis F. Madsen, Member | |
John V. Rindlaub, Member |
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Dow Jones | ||||||||||||||||
Alaska Air | Airlines | |||||||||||||||
Date | Group | S&P 500 | Group* | |||||||||||||
1999 | 100.00 | 100.00 | 100.00 | |||||||||||||
2000 | 84.70 | 90.90 | 135.19 | |||||||||||||
2001 | 82.85 | 80.09 | 89.22 | |||||||||||||
2002 | 61.64 | 62.39 | 50.89 | |||||||||||||
2003 | 77.69 | 80.29 | 65.84 | |||||||||||||
2004 | 95.35 | 89.03 | 61.56 | |||||||||||||
* | The companies included in the Dow Jones Airlines Group are: Air Tran Holdings, Alaska Air Group, AMR, Independence Air (formerly Atlantic Coast Airlines Holdings), Continental Airlines, Delta Air Lines, JetBlue Airways, Northwest Airlines, Skywest and Southwest Airlines. |
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Annual Compensation | |||||||||||||||||
Other Annual | |||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Compensation(2) ($) | |||||||||||||
William S. Ayer | 2004 | 368,985 | 110,326 | 7,388 | |||||||||||||
Chairman, President & CEO (Alaska Air Group | 2003 | 373,895 | 99,149 | 7,538 | |||||||||||||
and Alaska Airlines) | 2002 | 393,769 | 69,877 | 5,180 | |||||||||||||
George D. Bagley | 2004 | 283,938 | 58,775 | 6,249 | |||||||||||||
Executive VP/ Operations (Alaska Airlines) | 2003 | 286,482 | 56,723 | 6,146 | |||||||||||||
2002 | 296,120 | 43,708 | 12,719 | ||||||||||||||
Gregg A. Saretsky | 2004 | 236,615 | 48,979 | 70,885 | |||||||||||||
Executive Vice President/ Marketing & Planning | 2003 | 238,735 | 47,269 | 67,887 | |||||||||||||
(Alaska Airlines) | 2002 | 247,892 | 35,806 | 54,985 | |||||||||||||
Bradley D. Tilden | 2004 | 227,151 | 47,020 | 39,488 | |||||||||||||
Executive Vice President/ Finance & CFO | 2003 | 229,185 | 45,379 | 44,633 | |||||||||||||
(Alaska Air Group and Alaska Airlines) | 2002 | 235,130 | 34,047 | 42,719 | |||||||||||||
Jeffrey D. Pinneo | 2004 | 211,335 | 56,637 | 37,572 | |||||||||||||
President and CEO (Horizon Air Industries) | 2003 | 202,701 | 39,600 | 58,480 | |||||||||||||
2002 | 197,291 | 28,441 | 43,898 |
Long-Term Compensation | |||||||||||||||||
Awards | |||||||||||||||||
Securities | |||||||||||||||||
Restricted | Underlying | ||||||||||||||||
Stock | Options | All Other | |||||||||||||||
Name and Principal Position | Year | Unit(s)(3) ($) | (#) | Compensation(4) | |||||||||||||
�� | |||||||||||||||||
William S. Ayer | 2004 | 444,290 | 50,700 | 9,241 | |||||||||||||
Chairman, President & CEO | 2003 | — | 55,000 | 6,809 | |||||||||||||
(Alaska Air Group and Alaska Airlines) | 2002 | — | 150,000 | 6,810 | |||||||||||||
George D. Bagley | 2004 | 193,007 | 16,200 | 9,930 | |||||||||||||
Executive VP/ Operations | 2003 | — | 30,000 | 8,975 | |||||||||||||
(Alaska Airlines) | 2002 | — | 100,000 | 6,071 | |||||||||||||
Gregg A. Saretsky | 2004 | 160,695 | 13,500 | 7,046 | |||||||||||||
Executive Vice President/ Marketing & | 2003 | — | 20,800 | 66,373 | (5) | ||||||||||||
Planning (Alaska Airlines) | 2002 | — | 30,000 | 6,384 | |||||||||||||
Bradley D. Tilden | 2004 | 154,348 | 12,900 | 6,847 | |||||||||||||
Executive Vice President/Finance & CFO | 2003 | — | 20,000 | 6,355 | |||||||||||||
(Alaska Air Group and Alaska Airlines) | 2002 | — | 30,000 | 6,358 | |||||||||||||
Jeffrey D. Pinneo | 2004 | 140,500 | 10,800 | 12,522 | |||||||||||||
President and CEO (Horizon | 2003 | — | 20,000 | 14,505 | |||||||||||||
Air Industries) | 2002 | — | 30,000 | 13,310 |
(1) | Amounts included in this column for 2004 represent the “at risk” portion of market-based cash compensation for the named executive officers earned pursuant to the Performance Based Pay Plan. The Compensation Committee sets goals with respect to profitability as well as other financial and operating goals. Payments depend on the degree to which one or more of these goals is achieved. (See the discussion of the Annual Incentive Plan on page 27.) Mr. Ayer deferred payment of his 2004 Performance Based Pay Plan award of $110,326. In addition to this amount, as of December 31, 2004, Mr. Ayer had deferred an aggregate of $104,662, including interest earned, in connection with his 2003 award. |
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(2) | Includes the value of personal benefits, imputed interest and tax gross-ups for the imputed income in connection with certain of those benefits. Personal benefit totals that exceed the lesser of $50,000 or 10% of a named executive’s salary plus bonus in each of the past three years are included. Compensation for Mr. Saretsky includes $14,526 for automobile expense and $20,609 for executive travel in 2002; $14,723 for automobile expense and $29,159 for executive travel in 2003; and 13,624 for automobile expense and $31,188 for executive travel in 2004; Mr. Tilden’s 2002 compensation includes $12,900 for automobile expense and $12,383 in connection with executive travel; 2003 compensation includes $16,352 for automobile expense and $12,262 for executive travel; and 2004 compensation includes $16,843 for automobile expense and $9,922 for executive travel. Compensation for Mr. Pinneo includes $14,667 for automobile expense and $13,861 for executive travel in 2002; $16,000 for automobile expense and $23,962 for executive travel in 2003; and $16,262 for automobile expense and $9,591 for executive travel in 2004. |
(3) | Represents the value as of the date of grant (November 17, 2004) of restricted stock units awarded to the named executives, under which they have the right to receive the following shares of common stock, which had the following values as of December 31, 2004: Mr. Ayer — 15,400 shares/$515,746; Mr. Bagley — 6,690 shares/$224,048; Mr. Saretsky — 5,570 shares/$186,539; Mr. Tilden — 5,350 shares/$179,172; and Mr. Pinneo — 4,870 shares/$163,096. The awards vest on November 10, 2007. No dividends will be paid in connection with the restricted stock units. The closing price on the date of grant was $28.85. The closing price on December 31, 2004 was $33.49. |
(4) | Represents Company-paid contributions to individual 401(k) plan accounts and imputed income for the value (as determined by the Internal Revenue Service (“IRS”)) of a term life insurance benefit provided by the Company. In 2004, 401(k) contributions were $8,000 for Mr. Ayer, $8,000 for Mr. Bagley, $6,500 for Mr. Saretsky, $6,500 for Mr. Tilden and $12,447 for Mr. Pinneo. Imputed income for term life insurance during 2004 was as follows: Mr. Ayer, $1,241; Mr. Bagley, $1,930; Mr. Saretsky, $546; Mr. Tilden, $347 and Mr. Pinneo, $75. |
(5) | In connection with Mr. Saretsky’s acceptance of employment at Alaska Airlines in 1998, the Company provided a loan of $60,000 in connection with his moving expenses. Under the terms of the contract, if Mr. Saretsky remained with the Company for five years, repayment of the loan would be forgiven. The terms of the contract were fulfilled in 2003, and the Company forgave the repayment obligation. |
Individual Grants | ||||||||||||||||||||||||
Potential Realizable Value | ||||||||||||||||||||||||
Percent of | at Assumed Annual Rates | |||||||||||||||||||||||
Total Options | of Stock Price | |||||||||||||||||||||||
Number of | Granted to | Exercisable | Appreciation for Option | |||||||||||||||||||||
Securities | Employees in | or Base | Term(3) | |||||||||||||||||||||
Underlying Options | Fiscal Year | Price(2) | Expiration | |||||||||||||||||||||
Name | Granted(1) (#) | (%) | ($/Sh) | Date | 5% ($) | 10% ($) | ||||||||||||||||||
William S. Ayer | 30,700 | 10.0 | $ | 26.10 | 03/01/2014 | $ | 503,915 | $ | 1,277,018 | |||||||||||||||
20,000 | 6.5 | 28.85 | 11/17/2014 | 362,872 | 919,589 | |||||||||||||||||||
George D. Bagley | 16,200 | 5.3 | 26.10 | 03/01/2014 | 265,910 | 673,866 | ||||||||||||||||||
Gregg A. Saretsky | 13,500 | 4.4 | 26.10 | 03/01/2014 | 221,591 | 561,555 | ||||||||||||||||||
Bradley D. Tilden | 12,900 | 4.2 | 26.10 | 03/01/2014 | 211,743 | 536,597 | ||||||||||||||||||
Jeffrey D. Pinneo | 10,800 | 3.5 | 26.10 | 03/01/2014 | 177,272 | 449,244 |
(1) | These options were granted under the 2004 Long-Term Incentive Equity Plan. They: |
• | generally were granted as incentive stock options, subject to limitations imposed by tax law, | |
• | were granted at an exercise price equal to 100% of the fair market value of the common stock on the date of grant, | |
• | expire ten years from the date of grant, unless canceled earlier as a result of termination of employment, |
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• | vest in 25% increments on each anniversary date of the grant, subject to the terms and conditions of the 2004 Long-Term Incentive Equity Plan, and | |
• | provide for accelerated vesting under certain circumstances, as described under “Change-in-Control Arrangements” on page 36. |
(2) | Options were granted at the closing price on March 1, 2004, and November 17, 2004, as reported on the NYSE. |
(3) | The 5% and 10% assumed rates of appreciation over a ten-year period are required by SEC rules. This does not represent the Company’s estimate or projection of the future common stock price. If the Company’s common stock does not appreciate, these executives will receive no benefit from the options. |
Number of Securities | ||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
Shares | Options at Fiscal Year End | In-The-Money Options at | ||||||||||||||||||||||
Acquired on | Value | (#) | Fiscal Year End(2) ($) | |||||||||||||||||||||
Exercise | Realized(1) | |||||||||||||||||||||||
Name | (#) | ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
William S. Ayer | 0 | 0 | 285,325 | 187,175 | 1,238,742 | 1,334,816 | ||||||||||||||||||
George D. Bagley | 3,075 | 44,203 | 178,225 | 102,825 | 786,853 | 806,514 | ||||||||||||||||||
Gregg A. Saretsky | 5,199 | 49,640 | 85,026 | 53,175 | 274,249 | 463,810 | ||||||||||||||||||
Bradley D. Tilden | 0 | 0 | 69,875 | 50,050 | 327,087 | 438,705 | ||||||||||||||||||
Jeffrey D. Pinneo | 1,225 | 15,368 | 43,575 | 43,725 | 232,134 | 399,710 |
(1) | These values are calculated by: |
• | subtracting the option exercise price from the market price on the date of exercise, and | |
• | multiplying that by the number of options exercised. |
(2) | These values are calculated by: |
• | subtracting the option exercise price from the December 31, 2004, closing price ($33.49 per share) and | |
• | multiplying that by the number of exercisable and unexercisable options. |
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Annual Benefits Based on Years of Credited Service | ||||||||||||||||||||
Final Average | ||||||||||||||||||||
Base Salary | 15 | 20 | 25 | 30 | 35 | |||||||||||||||
$175,000 | $ | 52,500 | $ | 70,000 | $ | 87,500 | $ | 105,000 | $ | 122,500 | ||||||||||
$200,000 | 60,000 | 80,000 | 100,000 | 120,000 | 140,000 | |||||||||||||||
$225,000 | 67,500 | 90,000 | 112,500 | 135,000 | 157,500 | |||||||||||||||
$300,000 | 90,000 | 120,000 | 150,000 | 180,000 | 210,000 | |||||||||||||||
$350,000 | 105,000 | 140,000 | 175,000 | 210,000 | 245,000 | |||||||||||||||
$400,000 | 120,000 | 160,000 | 200,000 | 240,000 | 280,000 | |||||||||||||||
$450,000 | 135,000 | 180,000 | 225,000 | 270,000 | 315,000 | |||||||||||||||
$500,000 | 150,000 | 200,000 | 250,000 | 300,000 | 350,000 | |||||||||||||||
$550,000 | 165,000 | 220,000 | 275,000 | 330,000 | 385,000 | |||||||||||||||
$600,000 | 180,000 | 240,000 | 300,000 | 360,000 | 420,000 | |||||||||||||||
$650,000 | 195,000 | 260,000 | 325,000 | 390,000 | 455,000 |
Years of Credited | Final Average | |||||||
Named Executive | Service | Base Salary | ||||||
William S. Ayer | 9.3 | 362,522 | ||||||
George D. Bagley(1) | 11.1 | (2) | 272,516 | |||||
Gregg A. Saretsky | 6.8 | 232,895 | ||||||
Bradley D. Tilden | 13.8 | 212,938 | ||||||
Jeffrey D. Pinneo(3) | 6.7 | 207,018 |
(1) | When Mr. Bagley transferred from Alaska Airlines to Horizon Air in October 1995, he was 100% vested under the Salaried Retirement Plan. Horizon Air does not have a similar plan, but will supplement his benefits to ensure that his retirement benefit will be equivalent to what he would have received had he been employed during his tenure at Horizon Air with Alaska Airlines. |
(2) | Reflects combined service at Alaska Airlines and Horizon Air since becoming eligible for the Salaried Retirement Plan. |
(3) | When Mr. Pinneo was elected President and CEO of Horizon Air in 2002, he was 100% vested under the Salaried Retirement Plan on account of prior service at Alaska. At that time Horizon Air, which does not have a plan similar to the Alaska Airlines Salaried Retirement Plan, agreed to supplement his benefits to ensure that his retirement benefit will be equivalent to what he would have received had he been participating in the Alaska Airlines Salaried Retirement Plan during his tenure as President and CEO of Horizon Air. |
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Named Executive | Estimated Benefit(1) | |||
George D. Bagley | $ | 148,258 |
Named Executive | Estimated Benefit(1) | |||
William S. Ayer | $ | 231,233 | ||
Jeffrey D. Pinneo(2) | $ | 107,809 | ||
Gregg A. Saretsky | $ | 95,754 | ||
Bradley D. Tilden | $ | 100,167 |
(1) | Benefits payable under the Salaried Retirement Plan for service after the officer became a participant in the Supplementary Plan are not included in the amounts shown. The amounts shown do not reflect an offset for Social Security benefits. |
(2) | Mr. Pinneo’s Supplementary Plan benefits are also reduced by the benefits described in footnote 3 to the Salaried Retirement Plan table on the previous page. |
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REDEEM OR VOTE POISON PILL — YES ON 2 |
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TAKEOVER BID | WITHDRAWAL RATE | ||
Firms Without Pills | 11.2% | ||
Firms With Pills | 10.3% | ||
HOSTILE BID | FAILURE Rate | ||
Firms Without Pills | 66.7% | ||
Firms With Pills | 45.0% | ||
TAKEOVER RATE | S&P 500/400 | ||
Firms Without Pills | 5.6% | ||
Firms With Pills | 7.7% |
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LIMIT MANAGEMENT INFLUENCE |
CONFIDENTIAL SHAREHOLDER VOTING — YES ON 3 |
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CUMULATIVE VOTING — YES ON No. 4 |
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Rate of Support in 2003 was 70% |
Strong Investor Concern |
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Council of Institutional Investors Recommendation |
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Supporting Statement |
• | educate worker stockholders of the importance of this change to our company’s governance | |
• | corresponding special company solicitations | |
• | one-on-one management contacts with major shareholders |
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Commitment to Adopt Simple Majority Voting — Vote Yes on 6. |
75% Yes-Vote |
Our 96% Yes-Vote |
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Simply Take the Reasonable Steps for Adoption |
Remedy Under-Achievement in Corporate Governance |
Comprehensive Commitment to Adopt Simple Majority Vote Yes on 7. |
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Name and Principal Occupation | Business Address | Principal Business of Employer | ||
William S. Ayer | Alaska Air Group, Inc. and | Air transportation | ||
Chairman, President & CEO | Alaska Airlines, Inc. | |||
P.O. Box 68900 | ||||
Seattle, WA 98168 | ||||
Patricia M. Bedient | Weyerhaeuser Company | Forest products | ||
Vice President, Strategic | 33663 Weyerhaeuser Way So. | |||
Planning | Federal Way, WA 98003 | |||
Phyllis J. Campbell | The Seattle Foundation | Philanthropic | ||
President & CEO | 425 Pike Street, Suite 510 | |||
Seattle, WA 98101 | ||||
Mark R. Hamilton | University of Alaska System | Education | ||
President | 202 Butrovich Bldg. | |||
910 Yukon Drive | ||||
Fairbanks, AK 99775 | ||||
Bruce R. Kennedy | Alaska Air Group | Air transportation | ||
Chairman Emeritus | 19550 International Blvd., Suite 204 | |||
Seattle, WA 98188 | ||||
Jessie J. Knight, Jr. | San Diego Regional | Economic development | ||
President & CEO | Chamber of Commerce | |||
402 W. Broadway, Suite 1000 | ||||
San Diego, CA 92101 | ||||
R. Marc Langland | Northrim Bank | Banking | ||
Chairman, President & CEO | P.O. Box 241489 | |||
Anchorage, AK 99524 | ||||
Dennis F. Madsen | Recreational Equipment, Inc. (REI) | Retailer and online | ||
President & CEO | 6750 S. 228thStreet | merchant for outdoor | ||
Kent, WA 98032 | gear and clothing | |||
Byron I. Mallott | First Alaskans Institute | Development of Alaska | ||
President | 102 Cordova | Native peoples and their | ||
Juneau, AK 99801 | communities | |||
John V. Rindlaub | Wells Fargo Bank | Banking | ||
CEO, Pacific Northwest Region | 999 Third Avenue, Suite 4700 | |||
Seattle, WA 98104 | ||||
J. Kenneth Thompson | Pacific Star Energy LLC | Energy | ||
President & CEO | 3601 “C” Street, Suite 1400 | |||
Anchorage, AK 99503 | ||||
Richard A. Wien | Florcraft, Inc. | Retail flooring | ||
Chairman & CEO | 1991 Fox Avenue | |||
Fairbanks, AK 99701 |
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Shannon K. Alberts |
Bradley D. Tilden |
Number of Shares of | ||||||||||
Common Stock | ||||||||||
Purchased or | ||||||||||
Name | Date | (Sold/Exchanged) | Footnote | |||||||
Shannon K. Alberts | 1/1/03 – 12/31/03 | 124 | (1 | ) | ||||||
2/28/03 | 27 | (4 | ) | |||||||
5/30/03 | 30 | (4 | ) | |||||||
8/29/03 | 25 | (4 | ) | |||||||
11/28/03 | 30 | (4 | ) | |||||||
1/1/04 – 12/31/04 | 120 | (1 | ) | |||||||
2/27/04 | 25 | (4 | ) | |||||||
5/28/04 | 27 | (4 | ) | |||||||
8/31/04 | 22 | (4 | ) | |||||||
11/30/04 | 27 | (4 | ) | |||||||
11/30/04 | (170 | ) | (4 | ) | ||||||
William S. Ayer | 1/1/03 – 12/31/03 | 172 | (1 | ) | ||||||
1/1/04 – 12/31/04 | 251 | (1 | ) | |||||||
10/9/03 | 3,700 | (3 | ) | |||||||
Patricia M. Bedient | 12/03/04 | 90 | (8 | ) | ||||||
Phyllis J. Campbell | 5/21/03 | 282 | (8 | ) | ||||||
5/20/04 | 215 | (8 | ) | |||||||
Mark R. Hamilton | 5/21/03 | 282 | (8 | ) | ||||||
5/20/04 | 215 | (8 | ) | |||||||
Bruce R. Kennedy | 5/21/03 | 1,126 | �� | (8 | ) | |||||
5/20/04 | 429 | (8 | ) |
53
Table of Contents
Number of Shares of | ||||||||||
Common Stock | ||||||||||
Purchased or | ||||||||||
Name | Date | (Sold/Exchanged) | Footnote | |||||||
Jessie J. Knight, Jr. | 5/21/03 | 282 | (8 | ) | ||||||
5/20/04 | 857 | (8 | ) | |||||||
R. Marc Langland | 5/21/03 | 704 | (8 | ) | ||||||
5/20/04 | 536 | (8 | ) | |||||||
Keith Loveless | 1/1/02 – 12/31/02 | 170 | (1 | ) | ||||||
1/1/03 – 12/31/03 | 177 | (1 | ) | |||||||
12/30/03 | (1,046 | ) | (2 | ) | ||||||
Dennis F. Madsen | 12/1/03 | 89 | (8 | ) | ||||||
5/20/04 | 857 | (8 | ) | |||||||
Byron I. Mallott | 5/21/03 | 282 | (8 | ) | ||||||
5/20/04 | 429 | (8 | ) | |||||||
John V. Rindlaub | 5/21/03 | 282 | (8 | ) | ||||||
5/20/04 | 215 | (8 | ) | |||||||
J. Kenneth Thompson | 5/21/03 | 1,126 | (8 | ) | ||||||
5/20/04 | 215 | (8 | ) | |||||||
Bradley D. Tilden | 1/1/03 – 12/31/03 | 219 | (1 | ) | ||||||
1/1/04 – 12/31/04 | 257 | (1 | ) | |||||||
Richard A. Wien | 5/21/03 | 564 | (8 | ) | ||||||
5/20/04 | 215 | (8 | ) |
(1) | Investment in 401(k) plan. |
(2) | Transfer within 401(k) plan. |
(3) | Shares acquired upon exercise of employee stock option. |
(4) | Purchase (Sale) through Employee Stock Purchase Plan. |
(5) | Open market purchase. |
(6) | Open market sale. |
(7) | Gift. |
(8) | Director fees paid in stock. |
54
Table of Contents
55
Table of Contents
Preliminary
Alaska Air Group, Inc.
Solicited on Behalf of the Board of Directors
Annual Stockholders Meeting, May 17, 2005
I hereby appoint William S. Ayer and Keith Loveless each as my proxy, with power of substitution, and authorize them to represent and vote all shares of common stock of Alaska Air Group, Inc. (the “Company”) that I may be entitled to vote at the 2005 Annual Meeting of Stockholders of the Company (the “Meeting”), as indicated on the reverse side of this card, and with discretionary authority to vote against three stockholder proposals omitted from the Company's proxy statement under SEC Rule 14a-8 and in their discretion on any other matters that may properly come before the Meeting and any adjournment thereof.
I understand that if I sign but do not indicate a choice on any of the proposals on the reverse side of this card, my shares will be voted on that proposal in accordance with the recommendations of the Board of Directors, which are as follows: FOR the Board’s nominees in Proposal 1 and AGAINST Proposals 2 through 7.
SEE REVERSE SIDE | IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE. | SEE REVERSE SIDE |
ALASKA AIR GROUP, INC. C/O EQUISERVE TRUST COMPANY, N.A. P.O. BOX 8694 EDISON, NJ 08818-8694 | 2005 Annual Meeting of Stockholders Tuesday, May 17, 2005 — 2 p.m. Pacific Time The Museum of Flight in Seattle 9404 E. Marginal Way South Seattle, Washington |
Internet and telephone voting will be available 24 hours each day
until 11:59 p.m. Eastern Time, May 16, 2005.
Your vote is important. Please vote immediately.
Vote-by-Internet | Vote-by-Telephone | |||
OR | ||||
Log on to the Internet and go to | Call toll-free | |||
http://www.eproxyvote.com/alk | 1-877-PRX-VOTE (1-877-779-8683) |
If you vote over the Internet or by telephone, please do not mail your card.
If you are returning your proxy card by mail, detach the lower portion and return in the enclosed envelope to Alaska Air Group, Inc., c/o EquiServe Trust Company, N.A., Proxy Services, P.O. Box 8948, Edison, NJ 08818-8948.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
X | Please mark | |
votes as in | ||
this example |
Table of Contents
When completed and signed, this proxy will be voted as you have directed. If completed and signed with no direction given, it will be voted FOR ALL NOMINEES in Proposal 1 and AGAINST Proposals 2 through 7.
1. | Election of Directors | |||||||
Nominees: | (01 | ) | Phyllis J. Campbell | |||||
(02 | ) | Mark R. Hamilton | ||||||
(03 | ) | Byron I. Mallott | ||||||
(04 | ) | Richard A. Wien |
For All Nominees | o | Withheld From All Nominees | o |
o | For all nominees except as noted above |
FOR | AGAINST | ABSTAIN | ||||||
2. | Stockholder Proposal on Poison Pill | o | o | o | ||||
3. | Stockholder Proposal on Confidential Shareholder Voting | o | o | o | ||||
4. | Stockholder Proposal on Cumulative Voting | o | o | o | ||||
5. | Stockholder Proposal on Annual Election of Directors | o | o | o | ||||
6. | Stockholder Proposal to Adopt Simple Majority Vote When Amending Bylaws | o | o | o | ||||
7. | Stockholder Proposal to Adopt Comprehensive Commitment to Adopt Simple Majority Vote | o | o | o |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
Please sign exactly as your name appears on this proxy. Joint owners should each sign. If acting as attorney, executor, trustee or in another representative capacity, please sign name and title.
Signature: | Date: | Signature: | Date: | |||||||||||
Table of Contents
Preliminary
VOTING INSTRUCTION FORM | VOTING INSTRUCTION FORM |
Alaska Air Group, Inc.
Solicited on Behalf of the Board of Directors
Annual Stockholders Meeting, May 17, 2005
I hereby instruct Fidelity Management Trust Company as Trustee of the Alaska Airlines, Inc. Pilots Investment and Savings Plan and/or Vanguard Fiduciary Trust Company, as Trustee of the Alaska Air Group, Inc. Alaskasaver Plan, the Alaska Airlines, Inc. COPS, MRP and Dispatch 401(k) Plan, and the Horizon Air Industries, Inc. Savings Investment Plan (collectively, the “Plans”), to vote as indicated on the reverse side of this form all shares of common stock of Alaska Air Group, Inc. (the “Company”) allocated to me in any of the Plans at the 2005 Annual Meeting of Stockholders of the Company and any adjournment thereof.
I understand that if I sign but do not indicate a choice on any of the proposals on the reverse side of this form, my shares will be voted on that proposal in accordance with the recommendations of the Board of Directors, which are as follows: FOR the Board’s nominees in Proposal 1 and AGAINST Proposals 2 through 7.
I further understand that by signing this form, I am providing the Trustee with authority to vote on any other matter that may properly come before the Meeting and to grant a proxy granting discretionary authority to vote against three stockholder proposals omitted from the Company’s proxy statement under SEC Rule 14a-8 and in their discretion on any other matters that may properly come before the Meeting and any adjournment thereof.
SEE REVERSE SIDE | IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE. | SEE REVERSE SIDE |
ALASKA AIR GROUP, INC. C/O EQUISERVE TRUST COMPANY, N.A. P.O. BOX 8694 EDISON, NJ 08818-8694 | 2005 Annual Meeting of Stockholders Tuesday, May 17, 2005 — 2 p.m. Pacific Time The Museum of Flight in Seattle 9404 E. Marginal Way South Seattle, Washington |
This proxy when properly executed will be voted as directed.
If no direction is given to the Trustee by 11:59 p.m. Eastern Time,
May 12, 2005, the Trustee will not vote your shares held in the Plan.
Your vote is important. Please vote immediately.
Vote-by-Internet | Vote-by-Telephone | |||
OR | ||||
Log on to the Internet and go to | Call toll-free | |||
http://www.eproxyvote.com/alk | 1-877-PRX-VOTE (1-877-779-8683) |
If you vote over the Internet or by telephone, please do not mail your card.
If you are returning your proxy card by mail, detach the lower portion and return in the enclosed envelope to Alaska Air Group, Inc., c/o EquiServe Trust Company, N.A., Proxy Services, P.O. Box 8948, Edison, NJ 08818-8948.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
X | Please mark | |
votes as in | ||
this example |
Table of Contents
When completed and signed, this proxy will be voted as you have directed. If completed and signed with no direction given, it will be voted FOR ALL NOMINEES in Proposal 1 and AGAINST Proposals 2 through 7.
1. | Election of Directors | |||||||
Nominees: | (01 | ) | Phyllis J. Campbell | |||||
(02 | ) | Mark R. Hamilton | ||||||
(03 | ) | Byron I. Mallott | ||||||
(04 | ) | Richard A. Wien |
For All Nominees | o | Withheld From All Nominees | o |
o | For all nominees except as noted above |
FOR | AGAINST | ABSTAIN | ||||||
2. | Stockholder Proposal on Poison Pill | o | o | o | ||||
3. | Stockholder Proposal on Confidential Shareholder Voting | o | o | o | ||||
4. | Stockholder Proposal on Cumulative Voting | o | o | o | ||||
5. | Stockholder Proposal on Annual Election of Directors | o | o | o | ||||
6. | Stockholder Proposal to Adopt Simple Majority Vote When Amending Bylaws | o | o | o | ||||
7. | Stockholder Proposal to Adopt Comprehensive Commitment to Adopt Simple Majority Vote | o | o | o |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
Please sign exactly as your name appears on this proxy. Joint owners should each sign. If acting as attorney, executor, trustee or in another representative capacity, please sign name and title.
Signature: | Date: | Signature: | Date: | |||||||||||