What Are Some Of The Latest Developments At Alaska Airlines And How Will They Benefit The Company?
Alaska Air Group (NYSE:ALK) has reported impressive numbers through the year, even as other airlines witnessed a slowdown. In the September quarter, its revenues were up 3% y-o-y. Despite growing its capacity at thrice the size of the industry, Alaska was able to use it efficiently, as is reflected in its high 85.6% load factor. Although Alaska has beaten the legacy carriers in terms of revenue growth rates, a number of its programs lag those offerred by the likes of Delta, United, and American. In line with this, the company made a tactical and strategic decision to upgrade its mileage program and offer premium seating. The move is expected to positively affect the company’s revenue stream by making revenue a key factor in awarding upgrades, and charging an additional amount for the premium services offered. Both moves will bring Alaska on a level playing field, compared to the legacy carriers.
In the following article, we talk about some of the recent developments that have happened at Alaska Airlines.
First Commercial Flight Fueled With Alternative Fuel
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On 14th November 2016, Alaska Airlines created history by becoming the first airline to fly the first commercial flight using alternative fuel. The alternative fuel was made of forest residuals, i.e., the limbs and branches that remain after the harvesting of managed forests. The flight was from Seattle to Tacoma International Airport and Reagan National Airport, and used a 20% blend of sustainable aviation biofuel that is indistinguishable from regular jet A fuel. Alaska said that even if it replaced only 20% of its total fuel supply for only Seattle-Tacoma flights, greenhouse gas emissions would be slashed by roughly 142,000 metric tons of CO2, equivalent to taking 30,000 passenger vehicles off the road for an entire year.
This remarkable development is attributable to the work of the Washington State University-led Northwest Advanced Renewables Alliance (NARA). However, due to the costs involved in making this oil still being higher than regular oil, it won’t yet replace regular jet fuel. Gevo, a renewable chemicals and advanced biofuels company, said that it hopes to get the selling price of its pre-refined isobutanol product down to between $3.50 and $4.50 per gallon this year, so that it is comparable to crude oil, which sells for about $1.05 per gallon.
Upgrades To Its Mileage Plan
Recently, Alaska Airlines announced its plans to offer its Mileage Plan members several new benefits. This is being done in order to increase the number of members signing up for the carrier’s mileage plan, by making the offerings more comparable to those of the other carriers. Some of these new benefits are:
- Mileage Plan members with elite status, who book coach award tickets, will be eligible for complimentary upgrades to first class.
- Full-fare coach awards, those booked in fare class Z, will be eligible for instant upgrades provided that upgrade inventory is available.
- Elite members will be eligible for complimentary upgrades to the airline’s premium-economy lite section, Premium Class.
- It will begin to take fare class into account when awarding upgrades to first class from coach.
However, the spend-based program as opposed to the earlier mileage-based one is expected to take away the competitive edge Alaska had over the other carriers.
Introduction Of A Premium Class
In 2017, Alaska expects to launch a dedicated premium class product on its 737s and E175s. It will upgrade some of its main cabin seats to premium economy seats. The new seating program will not only provide additional legroom and more space between seats, but also greater overhead cabin storage space and features like power sockets for each seat. Following is a glimpse of how the 737s will be reconfigured to adjust for the launch of premium seating.
The move is expected to accrue an additional $70 million to Alaska’s revenues in 2017, which will increase to $80 million in 2018.
See Our Complete Analysis For Alaska Air Here
Have more questions about Alaska Air (NYSE:ALK)? See the following links:
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Alaska Air Group
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