Alaska Air Group CEO announces his retirement
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Alaska Air: the airline's network diversification continues ahead of closing Virgin America merger
During the next couple of years Alaska Air Group faces one of the most important milestones of its 84-year history with the presumed approval and closing of its merger with Virgin America, followed by the complex integration of the two companies.
Alaska has not offered capacity guidance for 2017, but its mainline fleet is projected to grow by just a single aircraft as it completes the phase-out of its Boeing 737-400 Classics. Its regional subsidiary Horizon begins deliveries of Embraer 175s in 2017, which could drive most of the group’s capacity growth for the year. But it is likely that Alaska is aiming to grow total ASMs below 2016’s increase of 8.5%.
As it prepares to close on its acquisition of Virgin America Alaska is continuing its stand-alone network evolution that includes capitalising on loosened operating restrictions at Newark airport, which helps the company bolster its position on the US east coast. Alaska is also targeting more midwestern markets in 2017, one feature of its efforts to diversify its offerings during the last few years.
US airlines Part 2: LCCs and ULCCs face the same cost overhang as their larger rivals
US low cost carriers and ULCCs observed many of the same trends in the country’s marketplace at the end of 2016 as their large global network rivals – namely, that weak pricing trends in the domestic market were improving. Each airline has its own nuanced view of that general operating environment, but they feel encouraged by what they hope is an inflection point in pricing that will lay the groundwork for a return to positive unit revenue.
Those lower cost and ultra-low cost airlines also face similar challenges to their larger counterparts – cost pressure from new labour contracts and rising oil prices. And like their larger rivals, most of the lower cost US airlines are plotting lower capacity growth in 2017 as a means to improve their respective revenue performances.
For now, pricing improvement that began in late 3Q2016 and a bump in demand after the US presidential election are sustaining the cautious optimism expressed by US airlines as 2017 gets under way. But no US airline is ready to declare that pricing traction in the country’s domestic market is on a sustained upswing.
This is Part 2 of two reports examining the outlook for US airlines in 2017.