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Alaska Air Group: capacity uptick in 2017 and fleet changes as Virgin America integration starts

Analysis

Now that Alaska Air Group has completed its acquisition of Virgin America, the combined company is offering capacity guidance for 2017 that is higher than the industry average. But Alaska is stressing that the projected growth is 2ppt below the combined increase of the two airlines in 2016. Much of the growth is driven by Alaska's delivery of 18 Embraer 175s used on routes to enhance network offerings from the hubs of both Alaska and Virgin America.

Adding Virgin America's network to its operations appears to be creating a competitive shield for Alaska. The company has refined competitive capacity growth estimates downward for 1Q2017 as the broader scale created by absorbing Virgin America gives Alaska the strategic network diversification that it lacked prior to the merger.

The merger integration between Alaska and Virgin America remains in its infancy, and many questions about fleet composition and branding remain unanswered. But in the short term Alaska aims to slow delivery streams for the Airbus A321neos in Virgin America's order book until it can properly determine fleet needs for the combined airline over the long term.

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