Alaska Air (NYSE:ALK)
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5 Years : From Jul 2012 to Jul 2017
The head of Alaska Airlines said Wednesday that its fleet provides a competitive advantage in the increasingly competitive Hawaiian market.
Flights to Hawaii from the U.S. west coast are a key focus of growth for the Seattle-based carrier next year, but low-cost rival Allegiant plans to launch services and other major airlines have also been expanding capacity.
"The unique thing we do is due to the airplane," said Bill Ayer, chairman and CEO of Alaska Airlines Group Inc. (ALK).
Alaska uses Boeing 737-800s, which allows it to direct more flights straight to resort destinations such as Maui. Rivals using larger planes funnel more passengers through Honolulu.
The airline unit of Allegiant Travel Co. (ALGT) is targeting Hawaii with five Boeing 757s acquired earlier this year, but has yet to announce its flight plans.
Ayer said Alaska also had an advantage through developing business from Bellingham airport north of Seattle, which is dominated by passengers driving across the border from Vancouver and other parts of British Colombia.
"You look in the parking lot and they are overwhelmingly B.C. number plates," said Ayer in an interview.
Alaska Air shares are up almost 50% so far this year, hitting an all-time high in August, and the company last week reported record quarterly earnings.
Ayer said the airline had been disciplined in adding capacity, sorted out its cost base with new union deals and ironed out operational problems that once dogged its customer service.
Alaska has more than a dozen marketing ties with other airlines and is seen as a logical takeover candidate for a carrier such as the American Airlines unit of AMR Corp. (AMR) looking to beef up its west coast presence.
"It's not that we are totally opposed [to a deal]," said Ayer after a speech at an industry conference in Seattle.
He said Alaska just preferred the prospects of continuing as an independent operator, mining its strong community links with the Pacific Northwest.
Similarly, he prefers to remain outside the embrace of any of the global alliances in favor of the patchwork of code-share deals, which include pacts with American and Delta Air Lines Inc. (DAL).
Like American, Alaska is distinguished in the U.S. industry by keeping the bulk of its regional flying in-house, rather than outsourcing to commuter carriers.
Alaska bought the Horizon Air regional carrier in 1986, and recently rejigged its relationship to improve benchmarking against a shifting industry landscape.
All of Horizon's services will from next year be run through a capacity purchase agreement with its parent--previously only half were accounted that way.
These agreements have become the norm across the industry as major airlines outsource services, and Ayer said the new arrangement will help Horizon and Alaska stay competitive.
He is not opposed to outsourcing--it already does with two commuter carriers in the state of Alaska--but believes the in-house model is best right now.
-By Doug Cameron, 312-750-4135; email@example.com