Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Alaska Air Group First Quarter Earnings Release Conference Call. Today's call is being recorded, and will be accessible for future playback at alaskaair.com. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session for analysts. Thank you. I would now like to turn the call over to Alaska Air Group's Director, Investor Relations, Emily Halverson.

Thank you, Chris. Good afternoon, and thank you for joining us for our first quarter 2020 earnings call. This morning Alaska Air Group reported a first quarter GAAP net loss of $232 million. Excluding one-time costs and mark-to-market adjustments, Air Group reported an adjusted net loss of $102 million. One-time costs incurred this quarter include approximately $160 million of asset impairment charges that were triggered as a result of the significant decline in demand for air travel and market conditions. These impairments included approximately $145 million of aircraft and aircraft-related parts, as well as approximately $15 million of financial and intangible assets. On today's call, Brad, Ben, and Shane will be discussing the impact of COVID-19 on our business and sharing details about our response to the economic and health crises. Several other members of our management team are also on the line to answer your questions during the Q&A portion of the call. As a reminder, our comments today will include forward-looking statements regarding future performance, which may differ materially from our actual results. Information on risk factors that could affect our business, which were updated today, can be found in our SEC filings. On today's call, we will refer to certain non-GAAP financial measures such as adjusted earnings and unit cost excluding fuel. As usual, we've provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release. And now I'll turn the call over to Brad for his opening remarks.

Thanks, Emily, and good morning, everybody. Thanks to all of you for joining us for our first quarter call. This call comes at an unprecedented time for our industry. Many people have lost loved ones or are distanced from their family and friends, and others have lost confidence in the future because of concerns about the economy or their own financial situation. People are justifiably fearful about the future. In the face of one of the greatest challenges in the history of aviation, our people at Alaska and Horizon are doing extraordinary work to respond to these circumstances. Our pilots, flight attendants, customer service agents, ramp service agents, mechanics, and others continue to come to work and be their best in an extremely difficult environment. They're caring for our guests with kindness while delivering safe and remarkable service to those who are traveling. All of us on the leadership team are grateful for their dedication. I also want to thank the very dedicated leaders at Alaska and Horizon, including folks around this table who are wholly focused on responding to this crisis and preparing Alaska to sustain itself and grow stronger in a highly uncertain future. Their commitment and their love for what they do and for this company give us all confidence that Alaska is going to come through this crisis stronger and better. We would typically use our earnings call to discuss our performance for the quarter, to provide an update on our strategic efforts, and to share guidance for the remainder of the year. But that does not make sense today. Instead, we'll be sharing with you what we know at this juncture, how we're thinking about future scenarios given the macro uncertainty, and how we plan to bridge what is essentially an economic closure across our country to a future where Alaska is stronger, better, and fully prosperous. As Emily mentioned, we incurred an adjusted pretax loss of $102 million for the quarter. This was the result of a 14% decline in passenger revenue, driven by the near-complete loss in demand that we began to see in early March. This is our first quarterly loss in over a decade, and it is sobering to report. There is no doubt that our second quarter loss will be much higher, and there's a very high uncertainty about the third and fourth quarters. Safety has always been our top priority, and this crisis has caused us to review and improve our procedures. We've implemented several changes, including expanding and enhancing the cleaning of our aircraft, including the use of high-grade registered disinfectants and electrostatic sanitizing spray. We're requiring our flight attendants and customer service agents to use masks. We're limiting load factors and seat availability. We've modified boarding procedures to encourage self-scanning of boarding passes and to promote slower boarding to prevent crowding. Additionally, we suspended or reduced most in-flight services. Beginning next week, masks will be mandatory for our guests. These changes can be difficult at first for both guests and crews, but our teams have handled them with professionalism. We anticipate further changes to our policies and procedures in the future, and we will continue to be industry leaders with health and safety standards. When we think about our industry and air travel more broadly, we're highly confident that in the future, people will want to physically connect with one another and see other places. As you know, we have taken and are continuing to take aggressive action to preserve our financial position. Shane will detail all of this. But we've acted swiftly to build on our already strong fortress balance sheet and have made some very difficult decisions to manage our cash burn rate. We've gone from a monthly burn rate of $400 million one month ago to approximately $260 million today, and our commitment is to get to $200 million by June and breakeven by year-end. Just two weeks ago, we received $992 million in payroll support from the federal government. The program was the result of decisive bipartisan actions on the part of our federal leaders, and we very much appreciate their efforts to provide direct support to airline employees. The passage of this bill demonstrates one of the bright spots that exists during this crisis. The opportunity for all sides to come together and work toward a common good. We are thankful for the efforts of the president and his administration, Congress, Secretaries Mnuchin and Chao, and many others for their efforts in providing this vital support to help our industry and our economy weather this downturn. While our full attention is focused on the situation at hand, we've always operated with our eyes on the horizon, and that focus continues today. We have been historically and are today financially conservative. We're proud to be the only pre-deregulation airline to not have filed for bankruptcy. Throughout history, our people have worked our way through challenge after challenge, and we've gained new skills and capabilities as we've gone along, coming away from these challenges better and stronger. We have every belief that will be the case this time, and we are fully focused on this outcome. With that, I'll pass it to Ben.

Thanks, Brad, and good morning, everyone. I want to begin by sharing a few of the facts we know. Our home base Seattle was among the first places in the country to be hit by the pandemic. In Washington, restrictions on gatherings and close contact have had a significant negative impact on our business. With many of our largest hubs in these two states, we began to see signs of demand deterioration in late February. On March 11th, we saw cancellations overwhelm gross new bookings for the first time ever. We have since experienced 56 days of net negative bookings. The largest wave of cancellations appears to be behind us; however, daily cancellations continue to modestly exceed gross new bookings. We are attentive to gradual improvements in our daily passenger count, which remain 90% below normal levels for us, showing very modest week-over-week improvement. In March, we reduced our capacity 12% versus the prior year, primarily through closing cancellations and consolidating frequencies. Soon after, we cut April and May capacity by 80% and expect to cut June flying similarly as well. The top near-term challenge we face is to reduce our current cash burn rate of $260 million to $200 million per month by June and to achieve our commitment for cash breakeven by year-end. To do this, we will lean heavily into our competitive advantages. Because it is impossible to forecast the shape of the recovery with any certainty, we are planning potential courses of action from multiple recovery scenarios. There are several factors about our business model and our competitive advantages that I believe will benefit us in any recovery scenario. First, we have built our business to have structurally lower costs than our competitors. Alaska has a history of managing our low overhead, high productivity operation, and this remains a guiding principle going forward. Our CASM ex-fuel is 20% lower than legacy airlines, which enables us to compete more effectively with low fares. More than ever, we see a future where low fares and low costs matter, and we have resolved to strengthen our cost advantage as much as possible. As Brad mentioned, we've received payroll support program funds from the federal government. These funds cover approximately 70% of our original budgeted payroll through September 30th and allow us to keep employees on the payroll while the airline is operating at significantly reduced capacity. This relief affords us more time to be thoughtful about restructuring decisions and how we will shed costs. It also presents opportunities to redeploy management employees and crew whose work has slowed to utilize their time with purpose where possible. For example, many management employees have been redeployed to other divisions or to clean aircraft. On the crew side, we're taking advantage of this shortfall in demand to retrain Airbus pilots as Boeing pilots to avoid both opportunity costs and economic costs. Shane's going to share more detail on our cost-saving opportunities that we're planning for. Second, we have strong hubs with some of the best customer loyalty in the industry. Even with passenger counts significantly down, the loyalty of our guests shines through. We welcome words of appreciation in person and over social media from travelers who have the need to travel, including medical personnel, loved ones going to meet and care for family members, and employees or business owners whose work requires them to travel for essential reasons. In fact, our guest-facing communications and positive sentiment across social media was recognized last week by the Airline Passenger Experience Association as the best in the U.S. airline industry. Third, our network orientation and fleet are well suited for the recovery ahead. It is likely that recovery will first bias towards domestic travel; our limited international exposure and our fleet of narrow-body aircraft will be assets in this scenario. As you know, we began a full fleet analysis last year. These crises have made it imperative that we take a fresh look at our long-term plans to ensure we select the best, most efficient aircraft for our future state. This will be another important aspect of our cost restructuring. Finally, our employees are aligning their commitment for the challenge ahead. Alaska has experienced being an underdog, and we are battle-tested. Today, we face new challenges, and the gravity of those challenges is understood by our people. Each day of this crisis, I'm struck by the dedication I see throughout the organization, from our crews that work together with leadership and experts on all of our guest-facing health and safety policies to our call center employees who have supported thousands of guests with challenging transactions and issues. Our finance, legal, communications, and government affairs teams have rallied after many long workweeks as we navigate changing business conditions. Thousands of employees across the company show their support through letter writing to the U.S. Treasury to help obtain industry support. While the prospect of a smaller industry and potentially smaller company is not something we would have wanted, we are realistic about the challenges ahead. We have more fight in us, and we will do what it takes to make Alaska emerge stronger. As always, we're focused intently on controlling what we can control. Outside of our control, but also important, is understanding what will influence demand recovery trends. To name a few factors, travel restrictions and stay-at-home orders that are likely to be lifted at different times, unemployment, broader economic trends, and evolving public sentiment about whether to travel for various reasons will all be considerations. Our role is to have robust plans for any scenario we may encounter to communicate honestly with our people about those plans and to execute against them to the best of our ability. We commit to doing that over the next several months as things become clearer, and to emerge from this crisis as a stronger and better company. That means getting to zero cash burn by December and setting up the conditions to control our destiny. And with that, I'm going to pass it over to Shane.

Thanks, Ben, and good morning to everyone joining us. My comments will focus on why we are confident Alaska will bridge this period of no demand, and continue forward as one of the industry's strongest performers. The appropriate place to start that discussion is cash on hand and our remaining capacity to create additional liquidity should we need it. We began 2020 with $1.5 billion in cash and marketable securities, to which we added $400 million from existing lines of credit, $425 million from a 364-day term loan. Subsequent to the end of the quarter, we added an additional $50 million in secured financing. In April, we received $992 million for payroll support via the CARES Act. Together, that totals $3.35 billion. Today, we have approximately $2.9 billion of cash and marketable securities on hand, meaning we burned about $467 million of cash from the beginning of the year. Our cash burn rate is a critical figure that we're managing aggressively, and today it is about $260 million per month. With demand at essentially zero, our $2.9 billion at this rate of burn would sustain us for 11.2 months. However, we intend to increase how long our cash will last. Our commitment, as Brad and Ben have both previously indicated and I will reiterate now, is to achieve $200 million cash burn by June and to reach cash breakeven by the end of the year. We know this will require significant work and hard decisions on cost removal and restructuring. While we are very focused on managing our cash burn, we also have multiple channels we can tap to add further liquidity to our current $2.9 billion, including more than $2 billion of high-quality unencumbered aircraft. Banks and investors we've spoken to have indicated interest in lending against these assets with reasonable terms. We have an additional $500 million of real estate and spot assets that we can borrow against again. We have a very valuable loyalty program that can be tapped for liquidity. We have available to us as much as $1.128 billion in CARES Act loans. Although in the category of having no current plans to tap, we believe our equity would be of very high interest to investors as well. This $7 billion to $8 billion of collateral and $1.1 billion of CARES Act loans represents well in excess of $4 billion of incremental liquidity potential. Taken together, our on-hand liquidity, our access to additional financing, and our aggressive goals to reach cash breakeven results by the end of the year will ensure that we bridge this downturn and are prepared to rebuild our success during a recovery. The increased debt load that will result as we navigate this crisis is obviously not our ideal long-term setup, but we are first and foremost focused on ensuring the survival of Alaska when the industry stabilizes. We will return our focus to repairing the balance sheet just as we did post-Virgin acquisition. To discuss cash reduction and preservation efforts, I would share the following. We have right-sized our schedule commensurate with demand and have seen a very strong linear reduction in non-wage variable costs. We have reduced discretionary and overhead spend by nearly $50 million per month. We have deferred nearly $600 million of capital expenditures for 2020, bringing our plan CapEx to under $175 million, which includes no additional aircraft capital spending. We have suspended share repurchases and dividends, and we have reduced executive pay, management hours by 10%, and have over 5,000 employees who have opted to take unpaid leave for at least the next 60 days. We have also implemented extended payment terms and have, in many cases, achieved payment relief from suppliers. I'd like to elaborate on a couple of these items. First, as mentioned, we've dramatically cut capacity in Q2 and anticipate operating a reduced schedule for the balance of the year. As a rule of thumb, I view our non-wage variable costs as representing 50% of our cost structure. Most of our operational contracts do not have minimums and so scale almost perfectly. Although I acknowledge under the current climate this has been extraordinarily difficult on our suppliers, wage costs are our largest cost factor and tend to be less variable. Our frontline workgroups have minimums within their contracts that ensure they receive a certain amount of pay. We have adjusted down to those minimums, which reduces payroll by about 10%. In partnership with our union leaders, we have also entered into other agreements that allow and incentivize employees to take leaves, which currently represent over 5,000 people. With these efforts, I expect payroll costs will be down 30% from plan for at least the next 60 days. We expect our CARES Act payroll support funds to cover the vast majority of our payroll through September. To date, none of these changes are structural, and there remains significant work to be done to achieve any longer-term changes to wage costs. Turning to aircraft. Given the temporary grounding of a significant portion of our fleet and our initial assumptions about demand over the next several quarters, we have determined that at least 12 mainline aircraft will be permanently parked, including 10 A390s that were among the smallest and least efficient aircraft we have, and two leased A320s that had not yet been reconfigured to our new interior. The rest of the parked aircraft are being stored and maintained so they can reenter service. We will make decisions about when and how many of them do return to service in the future. We are working all of the costs levers hard to drive towards our commitment of zero cash burn by the end of the year. To clarify, our cash burn rate does include the impact of refunds and cancellations and excludes the impact of CARES Act funds, payroll support funding, and additional financing. It factors in all of the self-help I've just described. Reaching our goal of $200 million cash burn by June and cash breakeven by the end of the year will require more work on our cost structure. But I believe we can achieve that. Our people attack tough goals like this with intensity and commitment. I believe that all 23,000 of our people understand that if we can achieve a breakeven cash burn rate, our destiny is squarely in our control, which means we are also in control of building toward a better future again. And with that, let's go to your questions.

Thank you. The first question is from Savi Syth from Raymond James. Your line is open.

Just on getting to cash burn zero or breakeven by the end of the year. I wonder if you could elaborate a little bit more on that and how much of that you expect to come from the revenue side. Depending on the kind of demand recovery, what kind of decisions and how quickly could you scale to that?

The way I want to talk about the cash breakeven is it's an objective that we have to get to. So we look at recoveries having to cross through zero. We've got to get there. We've put a marker out in front of us eight months from today. We actually don't know the exact path to get there. We don't know exactly what revenue is going to be. But what we're thinking is regardless of the revenue environment, we've got to make the decisions necessary to take the actions to get to cash breakeven. Obviously, we'll talk to you all a lot more as we get through some of that decision-making process and have better clarity about what Q4 looks like. But we're not relying on any particular revenue outcome to get there. On the scale question, I just want to make sure I understand. Are you thinking about if demand is better than we're thinking? Or, I just want to make sure I understand?

And then, clearly, unless you have a V-shape recovery, you have a lot of kind of difficult decisions in front of you. How quickly could you scale the operation to a new demand level? Is there a reality on how quickly you can scale that? I'm guessing some of the biggest fixed costs, so how do you get it to a new level of demand if we don't see a V-shape recovery?

If you're talking about scaling down, we don't know exactly how long that's going to take. A part of our business, like I mentioned, 50% of which is variable; it just moves with the operation. We've been really happy to see those costs almost perfectly linear with capacity. The other 50% is payroll and a lot of just overhead and fixed costs. The overhead and fixed costs that we can make decisions on are tough, but we can act on that quickly. I think it's really when you talk about the size of the company and how many people we have—that's something that takes more time. That's something we've got to discuss with our labor leaders and sort of work through over the next several months. But the most important thing is we've got to know what size of the company we're aiming for, and we just don't know that as we sit here today.

And if I may just ask a clarifying question on the cost. Really helpful to have the cash burn perspective, but on the P&L standpoint, what would you expect costs to be in Q2 generally?

Yes, unit costs I don't think are providing any guidance to you. The 50% that’s variable linear, I think you can calculate very closely just given our capacity. We're not really quantifying the other side of the business or revenue at this point. If we do, we'll be clear about that in the 8-K to ensure you know.

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

Just I guess two here. On the payroll support program, the $992 million. I believe you called out that you could potentially get something from McGee. Although that’s small, every dollar matters. And the $992 million that you got, it seemed like you received it in one installment. I know other carriers are getting it in two or more installments. I'm curious why you were able to get all of it. I have a second question. Thanks.

The Treasury gave us the option of taking it in a couple of installments or all at once. We looked at it closely. We didn't think there was a real difference. There's nothing fundamentally different about the terms. So we decided to take it all at once. A couple of other carriers may have taken it in installments, but it was just a choice given to us, so we took it all at once. Regarding McGee, they are in process. There were well over 200-250 applications for payroll support; the focus was on the largest carriers to begin with. They're in that process. We expect to hear back from treasury sometime this week. Their qualified amount was around $40 million, but nobody is getting 100%, so it's hard to know exactly what they'll get. They are in line to receive funding from the payroll support portion of the grant.

And then just my second question; reading between the lines, training Airbus pilots to fly Boeing jets and putting Airbus planes on the ground seems to suggest that fleet decisions are being made in real time. Can you discuss the situation regarding the A321 NEOs? Did you have any additional on order that were expected to come in, or did you take all the newer Airbuses? Any thoughts on that would be appreciated.

I might start and go to Ben. Those are good three questions in one. But no more A321s on order; we've taken the 10, and that answers that. I would say that we are training 240 pilots off of the Airbus onto the Boeing. That is a product of our determination that these 12 aircraft won't fly again. If we decide to backfill that capacity, we expect it will be filled by Boeing that we have on order today. It just made a lot of sense to marry those two decisions up to park the 12 aircraft or train pilots over. But Ben might add more on our future fleet planning.

As you can imagine, we’re doing a lot of modeling with different fleet structures. To give you a sense of what's guiding us, we have the zero cash burn rate goal we’re aiming for and we're restructuring the company to focus on low cost. A dual fleet does have a higher cost for us, which is a factor we consider. The Airbus 321 is a great aircraft; we like it a lot. We want to bring all these factors together. We’re going to look forward to determine how we’re going to reconfigure this company for the best success. A lot of things are in play, and as the months play out, we'll gain more clarity on our direction.

The next question is from Joseph DeNardi with Stifel. Your line is open.

Shane, just on the cash burn. I'm assuming that the $200 million by June assumes a similar revenue environment to what you're seeing now. What can you get that to by the end of the year if this revenue environment continues? This is to help us think about things apples to apples.

It does essentially assume demand is similar to what we're seeing right now. I’m not going to hypothesize about where we would be if there was zero demand at the end of the year. We're very focused on getting to cash breakeven, and that's what we're sort of putting in motion. It's just that the range of potential outcomes in Q4 is so wide it doesn't make a lot of sense to hypothesize where we’ll end up, especially on the revenue side.

The way we got to that is, that's what we believe is required for us to be able to control our future. Like all of these airlines, we’ve got decent liquidity; Shane detailed plans for raising liquidity, but that gets us to a finite number. At some point, you have a burn rate, and if you want to control your future, you have to take control of your future. That's our mentality. If we can get to zero cash burn rate by December, we're in control of our future in 2021 and beyond. And if there are opportunities to present themselves, we can take advantage of those opportunities. We believe it's going to be painful, but there's a lot of belief in making this commitment, and good things will come from it. We believe Alaska is configured to be a bit more agile than the average airline. Our fleet is essentially all narrow bodies. As Mike pointed out, we're moving 19 or 20 Airbus planes to Boeing. We think we can scale up or scale down depending on the demand we see better than some competitors. We like that our business is more oriented towards leisure travelers and domestic travelers using narrow-body aircraft. All of this influences our thinking. We don’t know what will happen, but if we define the future we need, we believe we can get there and will be in a better position to take advantage of future opportunities.

Shane, you mentioned $2 billion of unencumbered aircraft, $500 million in real estate, and then $7 billion to $8 billion of collateral. Does that imply that the loyalty program is kind of $5 billion-ish? Did that surprise you? Is it safe to assume that this would be the last line of liquidity you'd look at?

Yes, I think that math is probably fair, given you sort of added up the other asks that I didn't put a price tag on. I think we've known it's a valuable program for a long time. Regarding order preferences for raising money, honestly, we're not in a position to share that right now. We're still working on what the best opportunities for us are. There are a number of different vehicles we can go down, and the mileage plan is one of those and it’s on the table, but there's no certainty about which one we’ll do at this point.

The next question is from Jamie Baker with JPMorgan. Your line is open.

Can you provide a comment on how the negotiations with Treasury are going? When might we have some timing around the loan outcome? Also, did you list the loyalty program as an asset on the loan application that you are willing to pledge?

I would just start by saying that the discussions with Treasury and their advisors have been very productive. The group is trying to support the country and economy as best they can. On the loan side, it has been a bit slow. We talked last week with Treasury advisors, and they are intent on getting more clarity on the loan terms and collateral in the coming weeks. We anticipate more active dialog in the next five to ten days. Yes, we did list the loyalty program as expected to be included in our collateral based on their application process.

Those are all options of collateral...

And following up on Mike's comments, have you reached the walkaway point in the MAX contract? How should we think about that as it relates to future CapEx? And in the release, you mentioned lease deferrals. Can you add color on that as to the duration and when repayment will take place? Is it a net cash savings for the year, or did you just shift lease payments from the second quarter to the fourth, for example?

Boeing's been a terrific partner of ours for years and years. We have considerable predelivery deposits on hand with them. We’re working with them on sorting through what the right scenario is for that. That’s part of the fleet discussions we’re having internally as we figure out the most efficient fleet for Alaska moving forward. Regarding lease deferral discussions, we started those really in the second week of March, and have had good traction with all our lessors. I wouldn’t think of it as a 12-month process, as deferrals will eventually be repaid within 12 months. They understood from the beginning that we may have to revisit these discussions if the revenue environment remains challenging.

Your next question is from Helane Becker with Cowen. Your line is open.

Have you approached Horizon and SkyWest and asked them for the payroll support program cash that directly attributes to your business?

Horizon is a wholly owned subsidiary, so that comes to Air Group. SkyWest has been a fantastic partner throughout this process. Along with the costs from labor incurred to fly for us, their CARES funds have been funneled back to us through our contract.

We're also having similar discussions with ground service providers and other contract firms at airports who have received CARES grants, getting their perspectives on the situation.

Are you changing your operations at Paine Field to focus back on CTAC given the low demand? Also, with Seattle being one of the first cities to experience the virus, have you noticed any recovery in bookings as things begin to open up?

We've obviously materially reduced capacity just like everywhere else. We run 175 airplanes out of very low trip costs. We just maintain bare minimum service there. A lot of our folks live in that area and enjoy traveling out of Paine. Although extremely modest, we continue seeing carried passengers grow a little bit every day on our network. But it won't be until material changes in stay-at-home orders that we expect any significant shifts.

Diana, do you want to talk about what's happening in our state and other important geographies in terms of shelter-in-place orders?

We’ve seen the curve in Washington flattened, but the numbers haven’t necessarily gone down. West Coast state leadership has been working on a four-phase approach. We haven’t significantly opened up; Washington State is still in phase one, though outdoor recreation and construction have opened slightly. It varies by state, and we closely watch the state of play in our hub and at destination locations. In Alaska, there are still quarantine restrictions that we're monitoring.

The next question is from Catherine O'Brien with Goldman Sachs. Your line is open.

On your cash burn figure, can you provide some context? For the month of June, what assumption are you making on revenue? Are you counting on a similar situation to where we're trending today, or are you anticipating no improvement? Regarding your breakeven year-end cash burn figure, if demand remains at current levels, would you be able to take actions to achieve breakeven?

Yes, on the June number: We're assuming that it looks very similar to April and May, to be honest. No real recovery. It would be great if we saw an uptick in demand, but we’re not counting on that. Regarding the what-if scenario, I'm not going to speculate beyond saying that we have to focus on getting to our target. We’re not taking that goal off the table based on our current situation; we will go hard after it.

Can you elaborate on how you think about additional liquidity raises? What types of demand recovery scenarios are you making contingency plans for? What’s your comfort level with maintaining liquidity on the balance sheet assuming no improvements in demand over the medium term?

We’re very conscious that there’s a real asymmetrical risk to obtaining more cash versus not. Our bias is more liquidity is not going to be something we regret. We also know we need to avoid burning through that cash. In a perfect world, we know we’s burn through a lot over the next few months, but we would like to reach equilibrium as we get into 2021. We’re focused on ensuring our survival, so we can take advantage of opportunities when the economy starts to recover.

Whatever cash we raise, if we manage our burn, we simply pay it off and we are in good shape. If we don’t manage our burn, it burdens the company. We're going to be aggressive with our fundraising. That’s the personality of Alaska Air Group, but we hope we don’t emerge from this with an overwhelming amount of debt on our balance sheet. We need to manage our burn rate to prevent that.

The next question is from Hunter Keay with Wolfe Research. Your line is open.

I saw you're beginning to operate some tag flights, which I assume is due to the DoT minimum service requirements. Can you talk a bit about how this is impacting your operation and how it might influence your network post-COVID?

We only asked for exemptions for a couple of cities. The tag flights and what we call loopers serve as a very efficient way to cover multiple markets when demand is low. Instead of operating two flights, we can serve them with one single aircraft. Our crew times fit easily within those trips, and crews will stay over in hotels, especially on transcon flights, and come back. I think we launched about 11 markets this month and will be doing more. Our focus is on serving our guests with maximum utility at the lowest cost.

And Andrew, it's more based on our desire to take care of our customers than an order from the federal government.

As a follow-up, how do you approach serving multiple airports within one metro area, like Dallas with Love Field and DFW? Is there value in that complexity to serve your customers?

We've spent extensive time on our network and how everything fits together, looking at many scenarios on how to build and strengthen our network in the future.

Your next question is from Duane Pfennigwerth with Evercore ISI. Your line is open.

Shane, I hope you're enjoying an easy start to your new role. For Q2, you gave us your monthly cash burn number; what CapEx and debt service is included in that? And how much payroll support are you excluding from that expected in Q2?

So for debt service, it’s about $60 million a quarter, but it's a little lumpy throughout the period. For CapEx, as we noted earlier, all aircraft CapEx has been eliminated. What we have left is pretty minimal for a few ongoing projects. I don’t have that exact number in front of me, but it’s relatively minor.

Your comments about concerns over debt and being able to pay it down resonate because this is an earnings call attended by a bunch of equity analysts. What are the long-term implications for capital spending given that goal?

You raise good questions, but we wish we had more clarity and answers. We intend to share what we know today without too much speculation. If we do our job right, we can secure the liquidity we need, achieve our cash breakeven goal, manage the business well, and see recovery at some point. We can balance managing growth opportunities while also needing to backpay debt. We've got flexibility on the fleet side and we have significant PDP deposits with Boeing. We can take aircraft under some of that without new cash going out the door, which allows us to flex back up in the future.

The next question is from Darryl Genovesi with Vertical Research. Your line is open.

It's early to address how this is going to affect your long-term planning. What range of demand assumptions typically informed your planning? What was the bare-case assumption used for sizing airplanes or deciding whether to buy? Regardless of recovery timing, is 2020 likely to serve as the bare case modeled going forward?

We historically had downside models similar to what you're discussing. We wanted to manage through crises of previous sizes comfortably for our financial perspective to weather the downturn and ensure we were prepared for recovery. Nobody had modeled something of this magnitude, and it’s creating more consideration on how we think about future downside cases. We're currently modeling ranges of demand for 2021 that are all better than present conditions, but significantly lower than what we saw in 2019.

If there are no further questions, I’d like to turn the call over to Brad for any closing remarks.

Thanks for tuning in, everyone. We look forward to discussing more at the end of the second quarter.

Thank you for participating in today's conference call. This call will be available for future playback at alaskaair.com. You may now disconnect.