What’s Alaska Air Business Model?
Alaska Air Group, Inc. is an airline holding company. The Company, through its subsidiaries, provides air services to passengers in multiple destinations. Alaska Air also provides freight and mail services, primarily to and within the state of Alaska and on the West Coast.
What Alaska Air is doing in more details?
The fifth-largest airline in the US, Alaska Air Group offers unparalleled guest service, connectivity and schedules from its hub markets along the West Coast. With its regional partners, Alaska Air flies to over 115 destinations through the US and North America.
Alaska operates a fleet of narrowbody passenger jets on primarily longer stage-length routes, and contracts primarily with Horizon and SkyWest Airlines, Inc. (SkyWest) for shorter-haul capacity, such that Alaska receives all passenger revenue from those flights. Alaska Airlines’ fleet is comprised of over 210 aircraft.
Where Alaska Air is Operating?
Alaska Air comprises three reportable segments, Mainline, Regional, and Horizon.
The Mainline segment accounts for about 70% of Alaska Air’s sales and offers long-haul flights for passengers and cargo throughout the US, and in parts of Canada, Mexico, and Costa Rica.
Alaska Air’s Regional business consists of shorter-haul flights operated by Horizon and SkyWest, which together carried approximately 6 million revenue passengers, primarily in the states of Washington, Oregon, Idaho and California.
Horizon’s fleet, which carries nearly 70% of Air Group’s regional passengers, comprises 30 E175 jet aircraft and 32 Bombardier Q400 turboprop aircraft. The regional fleet operated by SkyWest consisted of 32 E175 aircraft.
The Regional segment generates about 20% of Alaska Air’s sales. The Horizon segment brings in the remaining 10% or so of sales. It consists of capacity sold to Alaska under capacity purchase agreements.
Where is the geographical reach of Alaska Air?
Delaware-based Alaska Air Group serves around 115 destinations through an expansive network in Alaska, US, Hawaii, Canada, Costa Rica, and Mexico.
The company leases operations, training, and data facilities in California, Oregon, and Washington, as well as line maintenance stations in Idaho, California, Oregon, and Washington. It also leases call center facilities in Arizona and Idaho.
What is Alaska Air’s Sales and Marketing Strategy?
Alaska Air’s airline tickets are distributed through the airline’s website and through traditional and online travel agencies. The travel agencies use global distribution systems to obtain fare and inventory data from airlines and reservation call centers, located in Phoenix, Arizona; Kent, Washington; and Boise, Idaho.
As its name implies, Alaska Air Group transports passengers throughout the United States and North America. Besides its own flights, the regional segment provides passenger service through contracts with SkyWest Airlines and Horizon.
Advertising expense was $41 million, $72 million and $79 million during the years ended December 31, 2020, 2019 and 2018.
What is Alaska Air Financial Performance?
Alaska Air’s revenue dipped after five years of sustained growth.
In 2020, the company’s revenue decreased $5.2 billion, or 59%, during 2020 compared to the same period in 2019, due to decreased revenue in all segments
The company reported a net loss of $1.3 billion in 2020, compared to net income of $769 million in 2019.
Alaska Air’s cash on hand ended the year at $1.4 billion. The company’s operations used $234 million, while its investing activities used another $593 million and its financing activities generated $2.0 billion.
Alaska Air’s main cash uses were aircraft and other flight equipment purchases, capital expenditures, net payments of long-term debt, and purchases of marketable securities.
What is Alaska Air Future Strategy?
Alaska Air strives toward maintaining and improving competitive cost structure by setting aggressive unit cost-reduction goals. The company’s strategy includes being the premier carrier for people living on the West Coast.
This results in a high concentration of its business in key West Coast markets. Alaska Air believes that concentrating their service offerings in this way allows them to maximize investment in personnel, aircraft and ground facilities, as well as to gain greater advantage from sales and marketing efforts in those regions. As a result, the company remains highly dependent on its key markets.
The company routinely engages in analysis and discussions regarding its strategic position, including alliances, codeshare arrangements, interline arrangements, and frequent flyer program enhancements, and will continue to have future discussions with other airlines regarding similar activities.
What are Alaska Air’s Mergers and Acquisitions?
In a noteworthy move within the US airline industry, Alaska Air Group in late 2016 acquired Virgin America for $2.6 billion. The company expects the deal to boost its annual revenue by 27% and to add to its earnings within the transaction’s first year.
The combined company replaced JetBlue as the fifth-largest US airline by traffic.
The Virgin America acquisition helped Alaska Air Group to better serve West Coast travelers. Virgin America also provides a platform for Alaska Air’s low-fare growth as well as enhanced international partnerships.
Additionally, the deal provides an opportunity to grow and improve the company’s loyalty program while gaining access to constrained gates, particularly on the East Coast.
What is Alaska Air’s Background?
Alaska Air strives toward maintaining and improving competitive cost structure by setting aggressive unit cost-reduction goals. The company’s strategy includes being the premier carrier for people living on the West Coast.
This results in a high concentration of its business in key West Coast markets. Alaska Air believes that concentrating their service offerings in this way allows them to maximize investment in personnel, aircraft and ground facilities, as well as to gain greater advantage from sales and marketing efforts in those regions. As a result, the company remains highly dependent on its key markets.
The company routinely engages in analysis and discussions regarding its strategic position, including alliances, codeshare arrangements, interline arrangements, and frequent flyer program enhancements, and will continue to have future discussions with other airlines regarding similar activities.
What is Alaska Air’s History?
Pilot Mac McGee started McGee Airways in 1932 to fly cargo between Anchorage and Bristol Bay, Alaska. He joined other local operators in 1937 to form Star Air Lines, which began airmail service between Fairbanks and Bethel in 1938. In 1944, a year after buying three small airlines, Star adopted the name Alaska Airlines.
The company expanded to include freight service to Africa and Australia in 1950. This expansion, coupled with the seasonal nature of the airline’s business, caused losses in the early 1970s.
Developer Bruce Kennedy gained control of the board, turning the firm around by the end of 1973. But the Civil Aeronautics Board forced the carrier to drop service to northwestern Alaska in 1975, and by 1978 it served only 10 Alaskan cities and Seattle.
Kennedy became CEO the next year. The 1978 Airline Deregulation Act allowed Alaska Air to move into new areas as well as regain the routes it had lost. By 1982 it was the largest airline flying between Alaska and the lower 48 states.
In 1985 the airline reorganized, forming Alaska Air Group as its holding company. The next year Alaska Air Group bought Jet America Airlines (expanding its routes eastward to Chicago, St. Louis, and Dallas) and Seattle-based Horizon Air Industries (which served 30 Northwest cities).
When competition in the East and Midwest cut profits in 1987, Kennedy shut down Jet America to focus on West Coast operations. To counterbalance summer traffic to Alaska, the airline began service to two Mexican resorts in 1988.
Fuel prices and sluggish traffic hurt 1990 earnings, but Alaska Air Group stayed in the black, unlike many other carriers. Kennedy retired as chairman and CEO in 1991.
That year the airline began service to Canada and seasonal flights to two Russian cities. Neil Bergt’s MarkAir airline declared war, cutting fares and horning in on Alaska Air Group’s territory. Alaska Air Group’s profits were slashed, and MarkAir went into bankruptcy.
Alaska Air extended Russian flights to year-round in 1994. The airline began service to Vancouver in 1996. That year it became the first major US carrier to use the GPS satellite navigation system.
In 1997 it added service to more than a dozen new cities but halted service to Russia because of that country’s economic woes in 1998.
Alaska Air Group and Dutch airline KLM agreed to a marketing alliance in 1998 that included reciprocal frequent-flier programs and code-sharing, and in 1999 it added code-sharing agreements with several major airlines, including American and Continental.
Alaska Airlines developed an online check-in system, a first among US carriers.
In 2000 an Alaska Airlines MD-83 crashed into the Pacific Ocean near Los Angeles, killing all 88 people on board. A federal investigation of Alaska Airlines’ maintenance practices found deficiencies, but the FAA eventually accepted the airline’s plan to tighten safety standards.
Like most carriers in the latter part of 2001, Alaska Airlines cut back its flights as a result of reduced demand after the September 11 terrorist attacks. As demand slowly returned in 2002, Alaska Airlines began to add new destinations and increase the number of flights on some established routes.
In its biggest deal ever, Alaska Air Group in late 2016 acquired Virgin America for $2.6 billion.