Boeing Growth at Alaska Airlines, But There's a Key Twist

Let's get this out of the way: Alaska Airlines is NOT All-Boeing. The airline operates 75 Embraers, which it means to keep for many years. The following chart shows the steady Boeing growth at the airline. Embraer has a lock on about a quarter of the fleet. [caption id="attachment_77522" align="aligncenter" width="580"] Alaska Airlines Fleet[/caption] The following chart shows the steady move to Boeing. Simplifying the fleet is universally thought to lead to better operational costs. The Air Current has an excellent interview with the airline's fleet head, discussing the logic of standardizing on the 737. Moreover, the MAX9 is the greenest aircraft in US service. [caption id="attachment_77523" align="aligncenter" width="580"] Alaska Fleet Breakdown by OEM[/caption] The fascinating part of the evolution of the Alaska fleet is the distinct move to upsizing into the single-aisle MOM segment. We think this is the real story. And it is also why the A321neo stayed on as long as it did. As we frequently do, we turn to Skailark data to delve into the details. The table summarizes Alaska Airlines data for 1H23. [caption id="attachment_77525" align="aligncenter" width="368"] Source: Skailark[/caption] The Airbus fleet was tiny compared to the Boeing fleet. The A321neo is a far more capable aircraft than the MAX9. Ownership costs drove the decision to retire the A321s. The A321neo ownership cost was $23 per seat compared to $10 for the MAX9. As Nat Pieper told TAC, Virgin America did not negotiate great aircraft deals. Alaska's A321neo per seat costs were $221 compared to the $181 for the MAX9. The decision to retire the A321neo fleet was easy to make. The A321neo is a highly-demanded aircraft, and the Alaska fleet is already set to move to another operator. Back to the single-aisle MOM. Take a look at the following chart. This, in our view, is the big story. Nearly 70% of Alaska's fleet is already in this category. No other US airline is near to this level. Frontier is the only other US airline with a similar surge but is far behind. [caption id="attachment_77526" align="aligncenter" width="580"] US Airline Single-Aisle MOM[/caption] By having the MAX9 as its standard aircraft, Alaska has the range it needs for the markets it serves across the US and Mexico. The A321neo was useful for its range, but ownership costs were too high. The MAX9 accomplishes essentially the same range at considerably better costs. The move to the MOM segment is a strategy that must be considered. [caption id="attachment_77527" align="alignleft" width="446"] Alaska Airlines Seats and Loaf Factor[/caption] What are Alaska's plans? Moving from a 169-seater 737-800 to a 179-seater MAX9 shows the airline has growth plans. This is an ambitious signal. The chart to the right shows the airline's rapid recovery from COVID. It also shows the growth in average seats per aircraft. The dip around 2017 was due to the merger with Virgin America when several smaller A319s and A320s were added. Finally, we have a chart that shows how disciplined Alaska is in growth terms. The decision to acquire Virgin America was a boost, and Alaska has a pattern of deliberate growth. [caption id="attachment_77529" align="aligncenter" width="580"] Alaska Airlines[/caption] Given the airline's history, the move to the MAX9 and holding on to the A321neo as long as they did send a signal.

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