CEO Brad Tilden of Alaska Air Group – parent company of Alaska Airline and Horizon Air – has said that the companies will be carefully monitoring the competitive environment before making any commitments. But Tilden continued that the air group plans to add 2% capacity next year and is thinking of adding 4% capacity in 2020. The airline’s long-term target is a 4%-6% annual capacity increase.
CEO Brad Tilden said at the company’s Investor Day. “We just need to a get few good quarters under our belt and we will see what late 2020, 2021 look like.”
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Alaska Airlines Available Seat Miles
|Year||Available Seat Miles (in thousands (000))|
Available seat mile (ASM) is considered the fundamental unit of production for passenger airlines and is equal to the number of seats available multiplied by the number of miles flown. For example, if a 200 seat airplane flies a leg of 1,000 miles then that leg produces 200,000 available seat miles.
Cost per available seat mile (CASM) is the fundamental measurement of the unit cost in the passenger airline industry and is determined by dividing operating costs by available seat miles. CASM is expressed in cents to operate each seat mile offered.
Revenue per available seat mile (RASM) is the established measurement of revenue generated by an airline and is determined by dividing various measures of operating revenue by Available Seat Miles. Revenue per available seat mile is expressed in cents received for each available seat mile.
At the companies Investor Day Alaska Airlines also reported encouraging trends on their reported revenue per available seat mile. The company has not yet issued guidance, but its plans suggest a bump of at least 3%-4% on RASM in 2019.
Alaska Airlines is projecting increase of cost per available seat mile, excluding fuel, of 2%-2.5% in 2019. The carrier says that more than 1% of the planned cost increase is due to a higher projected mix of regional flying versus mainline flying, as regional CASM is roughly double mainline CASM. Alaska Air Group added 10 Embraer E175s to its regional operations in 2018 while only adding two airplanes to the mainline operations. Two Q400s turboprops were removed from operation at Alaska Air Group in 2018.
“We don’t know what’s going on with the competitive environment. We don’t know how the fare environment will sustain. We’re already seeing interest rates rise. We are seeing housing sales slow down, especially on the Pacific Northwest,” CCO Andrew Harrison said. “I think if everything went the right way and all tells were headed north, you could maybe see [mid-single-digit] and higher..”
Impact on Alaska Airlines Pilot Jobs
It is important to be aware of the financial health and plans of potential pilot employers. If an employer is showing consistent poor financial results employee layoffs may not be far off. Additionally, pilot employer fleet capacity plans will have a direct impact on seniority and position advancement for pilots.
The late 2018 momentum combined with both new and Virgin America merger-related initiatives has investors encouraged on the health of Alaska Air Group moving forward. “All-in, we have growing confidence in Alaska’s RASM performance into next year, which should deliver favorable results over peers given lower capacity growth, the easing environment, and the host of initiatives ahead,” Morgan Stanley analysts said.
Alaska Air Group 2019 fleet plans are to add eight airplanes to mainline operations and four E175s to regional operations as well as removing seven Q400s from regional operations.
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