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Alaska Airlines is a listed US airline, with bases at Seattle, Anchorage, Portland and Los Angeles International airports. Alaska Airlines started as a small regional airline, and today serves over 60 cities across the US, Canada and Mexico. The airline's operations are based largely on the West Coast of America, with transcontinental and international service operating from its West Coast hubs. It is not currently a member of a global alliance, but has bilateral codeshare agreements with carriers straddling the major groupings, including Qantas, American, LAN and Cathay Pacific (oneworld), Air France-KLM and Delta (SkyTeam) and Air New Zealand (Star).
Location of Alaska Airlines main hub (Seattle/Tacoma International Airport)
Alaska Airlines share price
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Fiji Airways' new MD Stefan Pichler sets his sights on the next five years for the rebranded airline
Fiji Airways' new MD Stefan Pichler has begun work on the development of a five-year strategic plan which will build on the airline’s new branding and structure and seek to increase connectivity through codeshare and interline agreements to grow Fiji’s tourism industry.
With the transition from Air Pacific to Fiji Airways almost complete and the last of three A330-200s due to arrive in Nov-2013, management attention has turned to the domestic and regional Pacific Island subsidiary Pacific Sun which has also completed a restructuring over the past three years and is likely to receive a fleet upgrade to accommodate expected market growth.
Mr Pichler said in his first week in the job that Fiji Airways is in a pivotal period of growth and change. “The combination of a strong brand, new fleet of A330-200s and refurbished Boeing 737s, as well as improved schedules and services opens up an exciting new chapter for the airline”.
Frequent flyer programmes (FFPs) can be an emotive subject. For many frequent flyers, their status in these schemes and their ability to redeem hard-earned points are important quality-of-life factors. A recently published survey reveals significant differences in customer satisfaction with the award redemption process of different airlines.
This highlights the importance of FFPs to airline brands through their contribution to the passenger experience. FFPs have evolved from simple mechanisms to reward an airline’s frequent flyers with free flights on that carrier. They now embrace partner airlines and partner companies in other consumer sectors and can offer awards other than air travel. Awards are not even always restricted to humans: Virgin Australia has just announced a FFP for pets.
FFPs are also increasingly emerging as a profitable source of additional revenues for airlines. Although visibility of their financial contribution is mixed, there are growing examples of autonomous FFPs and third party investment and ownership.
This is the second report in a two part series examining the ultra low-cost carrier and hybrid business models in the US market place. The first part focused on ULLCs, including Spirit Airlines and Allegiant Air.
Similar to their ULLC peers, North American hybrid airlines stand at an interesting crossroads as consolidation creates opportunities for possible traffic, notably product differentiation. Carriers such as Alaska Airlines and JetBlue Airways that target higher-end leisure customers and more cost conscious business travellers will need to evaluate their products, and decide how to evolve as their competitive overlap with the three remaining legacy carriers (once American Airlines and US Airways complete their merger). The impact on them will be more pronounced than on ultra low-cost leaders Allegiant and Spirit.
JetBlue has already shown some signs of its potential evolution through its decision to create a premium section on daylight transcontinental flights in 2014 in order to cement its hybrid status and offer medium frills as its legacy transcontinental competitors all prepare to offer lie-flat seats on those flights and Virgin America already offers a dedicated first class.
Excitement exuded by Allegiant Air a year ago over its then-impending service launch to Hawaii has been dampened by the realities of operating the market. Allegiant has admitted the dynamics have changed in the US-Hawaii market place since it opted to acquire Boeing 757s during 2009 to link its small market US destinations with Hawaii. Now the carrier is tempering its expectations for its expansion into Hawaii and reining in capacity as a means to bolster its performance from the US west coast to the Hawaiian islands.
Allegiant is likening its seasonal capacity management from the US to Hawaii to adjustments it regularly makes in its Florida markets to properly align its supply with demand. But it is unclear just how firm the airline’s commitment is to Hawaii as it has not assured that some routes undergoing a seasonal suspension will return, and has hinted its Hawaiian operations are likely to be smaller in scale than originally planned.
Delta Air Lines continues to leverage the competitive strength it holds over its US legacy peers to flesh out its network and build pockets of strength as United and Continental remain in the throes of their merger integration and American and US Airways lay the groundwork to begin the complex process of combining their respective organisations.
During the last couple of years Delta has used the nimbleness it enjoys versus its legacy domestic competitors to broker equity investments in foreign carriers to build a robust network ahead of the completion of US consolidation. Those investments have moved in tandem with Delta’s bolstering its presence in New York through its slot swap deal with US Airways and its investment in facilities at JFK and LaGuardia airports.
During 2013 Delta is attempting to strengthen its position in the fragmented but strategic Los Angeles market through a 12% boost in daily seats year-over-year from Jul-2012 to Jul-2013.
Alaska continues to face challenges getting investors to acknowledge its solid financial performance
Alaska Air Group during the last few years has consistently outperformed its US carrier peers in a financial metric – return on invested capital (ROIC) – that is prevalent in discourse in other industries but has only surfaced in discussion among airline executives during the last few years. Since 2010 the carrier has exceeded its ROIC targets on an after tax basis and has posted annual profits for the last nine years. Despite its consistent profitability, Alaska’s robust financial performance is often overlooked by the investment community, leaving executives scratching their heads as to why the company’s consistent financial results are not more recognisable.
Even as Alaska delivers consistent profitability, questions often arise over the company’s growth prospects at its two subsidiaries – Alaska Airlines and Horizon Air (which now operates under the Alaska banner). The carrier holds an advantageous position as the leading airline in Seattle, where it can feed into long-haul flights operated by its partner Delta Air Lines. It also has a strong relationship with American Airlines, but it is not certain how that partnership will evolve once American and US Airways close on their merger and complete a roughly 18 month-long integration process. Alaska does have the opportunity to flesh out its domestic network, and remains bullish that it will still deliver sound financial results with planned annual capacity growth of 4% to 8% during the next few years.
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