Alaska announced its Q2 earnings yesterday, and the results were predictably very good. The airline beat estimates and came through with a 15.8 percent margin while running a solid operation. Sure, Q3 guidance was softer, but it has been for everybody and there’s some noise in there anyway. The reality is that Alaska just continues to do well… most of the time.
Winter continues to be a vexing problem for the airline. Specifically, it’s the time I call “darkest winter” — the post-holiday period until spring break picks up in late-February/early-March — that leaves Alaska trying to figure out what to do with all those airplanes.
I’m scratching the surface on Alaska in today’s post, but this week’s episode of The Air Show which comes out today has us going deeper into this very topic, including a look at my favorite new merger partner. And if you missed last week’s look at Delta, well, shame on you. You need to go subscribe now:
This year was easy. When the MAX 9 was grounded after that whole “plug door fall off” thing, the airline was scrambling to fly the schedule it had. But even with financial adjustments, the best it could have hoped for was a breakeven Q1. That’s better than losing a lot of money, but it’s not good enough.
I have to give Alaska credit. It knows this is a problem, and it has talked about it previously. Now, it has taken action. I’m just not sure how well this action will perform, but we’ll find out soon enough.
If you read the press release, you’d think Alaska was pushing forward this major expansion with 18 new routes. Really, it’s reorganizing resources. Yes, there are 18 new routes, and they fall into a variety of categories:
“Apple Vacations is Paying for This”
- Kansas City – Cancún, Puerto Vallarta
- St Louis – Puerto Vallarta
“If You Pay Us — or Give Us a Revenue Guarantee — We Will Come”
- Los Angeles – Kelowna (I’m guessing, but I don’t actually know if there’s subsidy)
- Vail – San Diego, Seattle
“We’ve Got Enough Juice in These Cities to Get People to Fill Our Planes to Warmer Climes”
- Boise – Bozeman, Orange County, Orlando
- Fresno – Guadalajara
- Sacramento – Los Cabos, Orlando, Puerto Vallarta, Tucson
“People Beyond LA Like Costa Rica Too, Right?”
- Liberia – San Francisco, Seattle
“Wait, We Don’t Fly That Already?”
- San Diego – Reno
“We Have Slots to Use and This is the Best Idea We Could Come Up With”
- New York/JFK – Puerto Vallarta
There are a lot of different swings here. Some are guaranteed to be fine, if not spectacular, like Apple Vacations which will buy most of the seats to make the flight happen while letting Alaska still sell the rest of the seats as its own. Others can’t lose thanks to revenue guarantees like the one that Vail is giving for three years.
Then there is the build-up in secondary markets like Boise and Sacramento, markets that Alaska probably considers part of its “Heartland” the way Northwest used to dominate secondary cities in the Upper Midwest. It’s an interesting effort that may or may not be successful depending upon competitive response.
Experimentation is good, but I have to imagine that the chances of all of these working are slim to none. That’s the kind of thing you have to do in winter when you’re Alaska and you want to improve your fortunes.
What wasn’t in the press release was the fact that there are offsetting cuts being made. In other words, the 18 new routes are the best new ideas the airline has, and those will replace the worst ideas that it had previously. That’s not really fair. It’s not necessarily that these were bad ideas. They’re just ideas that didn’t work or aren’t expected to during darkest winter. So what goes away? Here’s a map showing the whole picture:
Alaska Add/Cut map generated by the Great Circle Mapper – copyright © Karl L. Swartz.
In this last week’s schedule filing with Cirium, Alaska removed all service from Bozeman to Los Angeles and Orange County along with San Diego to Cancún. It also suspended flying during darkest winter on these:
- Portland: Atlanta, Minneapolis/St Paul
- San Francisco: Boston, Bozeman
- San Jose: Līhuʻe
Some of these may seem unsurprising, but San Francisco – Boston? Yep, it is suspended from Jan 6 through Feb 12. Alaska is struggling to fill some of those more business-y routes like this or Portland – Atlanta and MSP, so it is trying something different this coming winter.
This may very well help the airline do better next Q1, and that’s great. But the problem is, as Jon talks to us about on The Air Show this week, there are a lot of airplanes coming to this airline in the next few years. It doesn’t just need to make winter work with what it has. It needs to figure out how to put all of these new airplanes to productive use as well.
The more airplanes that arrive on property, the harder it’s going to be to make Q1 work. Then again, that is probably a bigger problem for another day. For now, it’s just trying to improve it’s fortunes in 2025.
27 comments on “Alaska Continues to Crush It In Summer, But It Has Winter Problems”
Guessing most of these new routes are seasonal and sub-daily, is that correct? Are any of them year round? What about the suspended routes, permanent or seasonal?
Interesting to see which ones are daily and year round because those indicate major investment in a route pair and a city aka the “heartland” strategy. Which seems quite a bit more significant than the others as they are the “throw planes someplace warm or with mountains during the dark days of winter” strategy which tends to be much more variable.
Yes, if you click on the link in the post the press release gives you those full details. All but one are seasonal and many are sub-daily but not all. As for suspended, I spelled that out in the post. Three appear to be exits while the rest are suspended for darkest winter.
How many of these new routes remain after 12 months? Let’s throw 18 news routes against the wall and see which ones stick.
Alaska’s hit-or-miss route map is looking more and more like a Spirit or Frontier route map
Interesting to hear “Alaska’s problem is too many airplanes” at the same time many people are saying “Southwest’s problem is not enough airplanes”.
I get that this is a seasonal thing, but it does raise the question of what fleet size is optimal given cyclic demand.
Alaska should lean heavy into leisure in the winter months when business markets are slow and there are a lot of planes. Their numbers show that it can sustain 11-12x SEAPHX, 4-5x PDXPHX, 3x daily SEAPVR/SJD with maybe a 4th on Saturday, and daily PDXPVR/SJD, flexing up to 2-3x on Saturdays. Similar to JetBlue’s strategy of sending the whole fleet to CUN and AUA on weekends in the winter. I can see an argument for increasing service on ANC-Hawaii, LAS, and PHX up from 1 daily, but AS neglects ANC. I hope BOIMCO works out and they can develop a market for BOI-FLL, and TPA eventually
Maybe I’m wrong, but I’m thinking that the merger with Hawaiian should help to smooth out some of Alaska’s seasonal cyclicality.
Right….?
West Coast – Hawai’i is actually very much a summer market. It seems strange, but that is how it goes. So it’s not clear just how much this would add.
I know it’s true, but it seems illogical. Summer is the time of year I do NOT want to go to Hawaii. It’s best when it’s cool and rainy at home.
I wonder how much of Alaska’s seasonal challenges are really about how Seattle, as a hub, is a challenge during the slower winter months and what that reveals about Delta’s Seattle operation, which is reported to run at a loss, subsidized entirely by the airline and kept there for prestige purposes, because it has no other viable West Coast gateway to Asia. Delta cant run most of its long haul routes out of Seattle daily, except in summer. AS is a different airline with a different network but still. This all spells long term problems for both carriers in SEA, but more for DL than AS.
Delta has the advantage of sending planes elsewhere in the winter to other hubs. I would think Delta would be able to take advantage of flying people everywhere on their own metal from Seattle. I do prefer having a ticket on a single carrier since that means if anything goes wrong, you know who to call to fix it.
Plus, it’s easier to score an upgrade on Delta flights to SeaTac than on Alaska.
Flights to/from SEA always seem 95-100% full on Alaska, regardless of the time of year. I think for some routes they could easily upgage to a bigger plane if they had Hawaiian’s fleet. (have you ever hoped for an upgrade on a flight from SEA to Chicago or SEA to Dulles? it’s wild how many MVP Golds there are)
With Boeing’s problems, couldn’t Alaska make a few bucks by pushing back deliveries and letting someone with a bigger need take them?
Check that: I looked and the majority of the AS orders are Max 10s. Those aren’t likely to be started earlier than 2026. They have 24 orders of max 8s and 9s that they can use to retire older aircraft ordelat and sell.
They can also convert Max-10 orders to 9’s or 8’s, like other airlines are doing
while the focus of this article is on AS’ new winter seasonal routes, they did report a pretty good quarter, something they haven’t done for years considering the Virgin America acquisition and the extra costs and revenue underperformance it added.
AS is in a pretty good position to handle the HA merger when it gets approved – which seems likely.
It is noteworthy that AS said that its 3rd quarter finances will be negatively impacted because of the new FA settlement – which has implications for AA and UA which have yet to settle a post-covid contract w/ their FAs. Add in retro – which will be large – and there will be a real impact to airlines that are having to catch up on labor costs.
And the suggestion that SEA is part of AS’ revenue seasonality issue is correct. The suggestion also above that DL is more impacted is a miss. Airlines don’t report hub profitability and while SEA probably has greater seasonal swings in profitability for DL, it is statistically impossible for SEA plus all of the other coastal hubs to have profits as low as “the internet” thinks DL has and DL still end up as the most profitable US airline.
DL does have a large southern US system which AS does not have which is the real takeaway from the comparison of AS’ profitability seasonality issues compared to other airlines. And notably UA has a similar – but not as pronounced swing because they do not have the Florida presence that AA, DL and WN have.
good for AS not only to show strong profits this quarter but to be making strong steps to reducing their swing in seasonal profits.
and a stronger AS means a stronger DL as well… both are very well-run and rational competitors.
It is widely known and it is also admitted by Delta themselves that SEA drives losses, offset by profitability elsewhere. Not a single DL long haul flight out of SEA (to Asia and Europe) is profitable. They can’t even run them daily in the slower, winter months.
Your logic sounds right initially, but is completely off.
A stronger SEA doesn’t mean a stronger SEA for DL. AS completely claps Delta’s cheeks in SEA. SEA has by far the lowest PRASM for Delta and the entire US. AS’ strong revenue comes at the expense of Delta’s in SEA.
Delta is so scared to do proper international expansion in SEA, despite the whole purpose of SEA being a TPAC hub, which is why United has now caught up with its powerhouse in SFO for the single largest TPAC operations in North America.
You’re not a TPAC hub when you only run 4 flights to Asia per day.
“You’re not a TPAC hub when you only run 4 flights to Asia per day.”
I’m going to hazard a guess that DL may not have enough modern wide body planes to even think about doing a TPAC hub at SEA.
At some point they’re going to have to get rid of the aging 757’s and 767’s and start buying new, modern wide body jets at a faster pace otherwise opportunities like a SEA TPAC hub are going to pass them by.
DL has a large and growing fleet of A330 and A350 aircraft replacoing 767s and the 777s retired during covid.
Delta currently has 64 Boeing 767 aircraft – 43 300ER and 21 400ER. Please note that the the 767-300’s are scheduled to be retired in 2030.
They’ve added 28 Airbus A330-900 Neo and 30 Airbus A350. They also have 42 Airbus A330-200 and A330-300. Thirty one of the A330-220/300 were originally NW aircraft.
Delta flies the A300-900 Neo exclusively on their 4 direct TPAC flights (2 to ICN, 1 to HND, 1 to TPE). The majority of Delta’s TPAC flights are on either partner aircraft or via connections at Delta hubs.
It seems to me that Delta is spreading their modern wide body (Airbus) aircraft pretty thin and this has resulted in them having a very sparse “hub” at SEA.
A big iimpediment to DL’s SEA growth is the lack of gate space available. The airport is very full and virtually all SEA widebody gates close down 2 narrowbody gates. With the explosion of international growth at SEA, it makes it very difficult to gate flights, especially on widebodies, on common use gates.
You can blame SEA infrastructure as a reason sure. But part of an airline’s job of growing a hub is to invest in the infrastructure of the airport or make strategic decisions about hubbing at an airport if there are so many logistical and operational issues.
I know that Delta and the POS have made some improvements to it’s gates at SeaTac. It’s just that it isn’t enough. Alaska also increased the size of the North satellite gates as well. There is simply not enough room for everyone right now as evidenced by use of hardstands by both Delta and Alaska.
The S Terminal is definitely a mess. Had a bad experience waiting for a gate there last week. (of course the airline blamed another airline)
Why not include LAX-La Paz? I guess that would be in the “Juice” category.
Johosofat – That was from a previous announcement, so I didn’t include it.