Alaska Airlines Picks Up Routes Abandoned by Other Carriers

Collecting the castoffs

Steve Wilhelm, Puget Sound Business Journal (Seattle), 8/21/2009 (excerpted)

To cope with the recession-driven downturn in air travel, Alaska Airlines is using a tactic it first developed after the terrorist attacks of 2001: stepping into abandoned east-west routes to give the West Coast airline greater national reach.

This fall the carrier will launch new routes to Houston, Atlanta, Chicago and Austin, Texas, to the east; and to Hawaiian destinations, including Maui and the Big Island, to the west. Some of these routes will start from Seattle, others from Portland and Oakland, Calif.

Alaska is picking up many of its new routes when other carriers have either reduced their flight frequency or abandoned routes entirely, mostly due to the recession. For example, Alaska added more routes to Hawaii following the demise of ATA and Aloha airlines. It also picked up a Seattle-to-Austin (Texas) route when American Airlines discontinued the run.

“It's a great way for Alaska to keep their planes relatively full and utilization rates up,” said Peter Jacobs, analyst for Ragen MacKenzie brokerage in Seattle. “Over the past 12 months, as airline travel has declined, Alaska has done a very good job of matching capacity with demand.”

The increase in east-west routes is transforming Alaska's profile, and by the end of 2009 east-west routes will account for about one-third of Alaska Airlines' network, said Andrew Harrison, the airline's vice president of planning and revenue management.

“Until 2001, it very much was a north-south network. Over the last seven to eight years, we've grown to west to east,” Harrison said. “What happened after 9/11 is not hugely different from what's going on today.”

The airline is part of Seattle-based Alaska Air Group Inc., which also includes Horizon Air.

Alaska's tactic has grown out of several factors:

— It dominates West Coast traffic, which gives it a base of passengers to feed the new east-west routes.

— Its newer 737-800 aircraft have the range to fly nonstop from coast to coast.

Alaska has shifted its entire fleet to 116 “next generation” series Boeing 737 aircraft, while it has retired the last of its less-efficient MD-80 aircraft.

Key to Alaska's strategy is attracting transcontinental passengers from Horizon Air's local routes, as well as from passengers who prefer Alaska Airlines and who are committed to its frequent flyer program.

“It's good business. Passengers that live and reside on the West Coast, they know Alaska, they're probably members of Alaska's mileage plan and, all things being relatively equal, they're going to use Alaska when they have to fly back to Boston, Washington, D.C., Miami or Atlanta,” Jacobs said.

Alaska's new east-west routes are primarily daily or twice-daily flights, compared with the high-frequency north-south flights that Alaska operates on the West Coast.

Alaska's Harrison said the new east-west routes have been well used by passengers, although he declined to say whether the routes are profitable or how many seats are being sold.

Ironically, one thing that helped prepare Alaska for national competition was its long scuffle with rival Southwest Airlines , which also is strong on the West Coast.

“From many years competing with Southwest, we use the principles and things we have learned,” Harrison said, adding that the east-west expansion also is preparing the company for an economic rebound.

“When business travel does pick up to more normal levels, we have positioned ourselves to be in a position of strength,” he said.

Jacobs agrees. He expects Alaska to be profitable for 2009 and 2010, partly on the basis of its tactics to take on new routes to compensate for the down economy.

“They are one of the few profitable airlines in the U.S. right now, and seem to be holding their own competitively,” he said.

Flight paths

Alaska Airlines is again using the strategy of picking up routes from airlines that either cut back or went out of business. Since 2000 Alaska has added or plans to add the following destinations. All are from Seattle unless otherwise indicated:

Destination/Year added

Chicago 2000

Washington, D.C. 2001

Miami 2002

Newark, N.J. 2002

Boston 2002

Denver 2002

Orlando, Fla. 2003

Dallas/Fort Worth 2005

Honolulu and Kauai 2007

Maui, Hawaii 2008

Kona, Hawaii 2008

Minneapolis/St. Paul 2008

Maui (from Portland) July 2009

Austin, Texas August 2009

Houston September 2009

Atlanta October 2009

Maui (from Oakland, Calif.) November 2009

Kona (from Oakland, Calif.) November 2009

Chicago (from Portland) November 2009