Tag Archives: Alaska Air

Business, Finance, Occupation & Industry

Secrets of Successful Airlines

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By Asit Sharma, The Motley Fool

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The airline industry has a singular talent for draining the pockets of well-intentioned investors. Highly leveraged balance sheets and bankruptcies are the norm. Significant labor costs and unpredictable jet fuel prices wreak havoc on variable costs. Yet some airlines generate solid returns quarter after quarter. Alaska Air Group , Ryanair , Southwest Airlines , and Copa Holdings each manage to be consistently profitable. Let’s examine a few themes they share in common, and zero in on their individual strategic ideas.

1. Go regional
None of the four airlines above tries to compete on a grand international scale, with presence in every metropolitan area that looks enticing on a map. Instead, each confines itself more or less to a geographical theme. Alaska Air, for example, primarily focuses on the West Coast of the U.S., along with Alaska (naturally) and Hawaii, with some coverage in the Midwest and on the East Coast. Ryanair operates as a European carrier, with comprehensive coverage across the continent.

2. Maintain a uniform fleet
Southwest pioneered the practice of buying a single type of aircraft from the same manufacturer, which cuts down on maintenance costs significantly, as less specialization of maintenance is required and a standard extra-parts inventory can be maintained at various airports. Large carriers that choose to service a variety of hubs and both short- and long-haul flights can end up like US Airways, which stocks its fleet with multiple model series from at least three different airline manufacturers.

3. Invest in a fuel-efficient platform
The actual aircraft that makes up a uniform fleet is a significant decision. All four airlines have invested heavily in the fuel-efficient Boeing 737 platform. Variants of the 737 represent nearly all of the these companies’ active fleets. The 737 has been in continuous production since 1967, and it has been marked by continuous evolution in fuel efficiency and performance in the short-to-medium-range flight segment. So after choosing to implement a uniform fleet strategy, each of this group has voted the venerable 737 series with their checkbooks and long-term debt capacity.

Beyond these three key points, each airline has a strategic bet fueling its returns:

Alaska Airways
Alaska Airways focuses on return on invested capital, or ROIC, as a key performance metric. ROIC is an excellent metric for an airline to consider, as it counts all invested capital, including debt a company must repay, as the base on which financial returns are earned. ROIC forces a company to understand its returns in the context of its debt. In 2012, the airline achieved an ROIC of 13% .

Alaska Airways also invests in its people. In 2012, Alaska’s net income as a percentage of revenues was 6.8%. It could have been 8.6%, but the company paid out $88 million of variable incentive pay to its workforce. By making such a significant discretionary payment, the company is proving the premise that giving its workforce an incentive to work around a “common set of goals” will

From: http://www.dailyfinance.com/2013/04/12/secrets-of-successful-airlines/

Business, Finance, Occupation & Industry

Hawaiian Airlines Goes Global: Why It Matters

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By Adam Levine-Weinberg, The Motley Fool

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Last week, Hawaiian Holdings subsidiary Hawaiian Airlines added yet another new international route from its Honolulu hub: Auckland, New Zealand. Auckland is the seventh new international destination Hawaiian has added in the last two-and-a-half years, following Tokyo, Osaka, Fukuoka, and Sapporo (all in Japan), Seoul, South Korea, and Brisbane, Australia. Hawaiian will also begin service from Honolulu to Sendai, Japan, in June (as part of a triangle route with Sapporo), and plans to begin service to Taipei, Taiwan, in July. 

Revenue diversification
By July, Hawaiian will fly to 13 destinations in Asia and Oceania, up from just four in 2010. Adding these international flights has provided significant revenue diversification for Hawaiian; international routes account for 32% of Hawaiian’s revenue, and that percentage is growing. Most recently, Hawaiian has been focusing its growth on markets where there is little or no competition. It is the only carrier on the Sapporo and Brisbane to Honolulu routes, and will be the only carrier on its upcoming routes to Sendai and Taipei. Hawaiian is also the only American carrier serving Auckland, and competes only with Air New Zealand on the Auckland-Honolulu route.

Adding routes with no competition has an obvious benefit: It creates pricing power for Hawaiian. Most of the company’s new destinations have significant untapped demand for travel to Hawaii, and Hawaiian Airlines should see rising traffic as residents become aware of the new service. Furthermore, Hawaiian’s growing international network creates possibilities for connecting passengers traveling between the U.S. mainland and international destinations via the Honolulu hub.

Merger in the future?
Hawaiian’s strong and growing international presence makes the company an intriguing merger candidate. American Airlines has been historically weak in Asia; as of this summer it will have just eight routes to four Asian cities (Tokyo, Shanghai, Beijing, and Seoul). Merger partner US Airways brings nothing to the table: It has never served Asia. Neither of the two carriers have any flights to Oceania, either. As such, Hawaiian could be a future merger target for American. Honolulu is ideally located for connecting traffic between North America and Oceania. While it is not as convenient for connecting traffic between North America and Asia — for most itineraries it is at least 1000 miles out of the way — offering free overnight layovers in Honolulu could attract passengers. Moreover, with a market capitalization of approximately $325 million, Hawaiian would be a relatively cheap acquisition.

Alaska Air could be another suitor, though this scenario is somewhat less likely, and could run into regulatory issues since the two are the leading carriers from the West Coast to Hawaii. Alaska does not have any international presence, although it has a partnership with Delta Air Lines that gives its customers access to Asia. A combination with Hawaiian would give Alaska a launching pad to introduce its own international service to Asia, the fastest-growing aviation market in the world.

Conclusion
Hawaiian Airlines‘ increasing international footprint is a key …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

52-Hour Delays at Allegiant Will Help Competitors

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By Adam Levine-Weinberg, The Motley Fool

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Allegiant Travel had a very rough beginning to the spring break season, as its Boeing 757 fleet was plagued by mechanical issues last weekend. More than 1700 Allegiant customers traveling to Hawaii faced delays of up to 52 hours. Since Allegiant flies multiple routes with each airplane, the delays affected passengers coming from at least five different cities on the West Coast.

The delays came about when three of Allegiant’s Boeing 757s ran into mechanical difficulties over the weekend. Allegiant primarily flies MD-80 aircraft, which do not have enough range to reach Hawaii; therefore Allegiant relies on its six 757s for all of its Hawaii routes. Since March is Allegiant’s peak season, the company did not have any spare aircraft available. In the end, it took days for Allegiant to resolve the mechanical issues and get its customers where they wanted to go.

A win for the market leaders
Allegiant’s woes are a win for the two leading players in the West Coast-Hawaii travel market: Hawaiian Holdings and Alaska Air . Hawaiian has been a major player in the market for decades, whereas Alaska has grown rapidly since entering the Hawaii market in 2007.

While Hawaiian and Alaska generally cater to a more affluent and less price-sensitive customer than Allegiant, analysts have still worried that Allegiant’s low-cost model would draw some customers away from them. With significantly lower costs and higher ancillary fee revenue, Allegiant can afford to price lower than its competitors. Allegiant competes with Hawaiian on routes from Las Vegas and Phoenix to Honolulu, and with Alaska on routes from Bellingham, Wash., to Honolulu and (seasonally) Maui. The carriers also compete indirectly in northern California, where Allegiant flies to Stockton, which is about an hour’s drive from Sacramento and the Bay Area.

Allegiant’s latest misstep may help Hawaiian and Alaska convince their customers that paying a little extra for a better carrier is worthwhile. Allegiant had similar mechanical troubles leading to long delays last November. Suffering two major mechanical incidents in just four months casts some doubt on the reliability of Allegiant’s Boeing 757 fleet, which are 20 years old on average. By contrast, Alaska and Hawaiian have younger and larger fleets, which makes them unlikely to suffer such long delays due to mechanical problems.

Not worth the savings
Ultimately, travelers going to Hawaii are looking for a relaxing, refreshing trip. The stress of having a flight delayed by a day or more negates that goal. Furthermore, the cost of missing a day of work could easily offset any money saved by buying the cheapest ticket. Allegiant will still thrive in its niche of smaller markets that don’t have other direct service, and will also cater to the most price-sensitive travelers. However, for most customers choosing between Allegiant and either Alaska or Hawaiian, paying a little extra to fly a more reliable carrier will prove to be the best deal of …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Military jets escort Alaska Air flight after hijacking scare

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Two F-15 fighter jets were scrambled to escort an Alaska Airlines flight from Kona, Hawaii to Sea-Tac Airport in Seattle after someone reportedly told the Federal Bureau of Investigation there was a hijacker on board the plane.

Q13 FOX News reported that Flight 819 landed at Sea-Tac without incident shortly after 7 p.m. PST and the FBI detained and questioned a passenger who reportedly had slept through most of the flight.

There was no threat to public safety, the FBI told Q13 FOX News.

The threat was called into the FBI‘s Honolulu office Thursday afternoon and the bureau subsequently informed other agencies and local authorities in Seattle of the call, according to FBI spokesman Tom Simon.

“They were trying to figure out why the man is described as a hijacker. It could be a crank,” Simon told Fox News.

Simon said the passenger in question did not show any unusual behavior on the flight.

“If this turns out to be hoax phone call the FBI in Honolulu will take this very seriously,” Simon said.

An investigation into the phone call is ongoing, according to the FBI.

Click here for more from Q13 Fox News.

Source: FULL ARTICLE at Fox US News