If Wall Street analysts were holding their breath fearing that Delta Air Lines’ growing competition would put a big dent in Alaska Air Group’s first quarter earnings, they could breathe easier Thursday.
The SeaTac-based carrier announced earnings early Thursday of $149 million or $1.12 a share in what traditionally has been its weakest quarter. Those figures compare favorably with net income of $94 million or 68 cents a share in the first quarter of 2014.
The more favorable results beat Wall Street expectations of $1.10 a share. The first quarter was the fourth consecutive quarter in which the airline holding company, parent of Alaska Airlines and regional carrier Horizon Air, beat analysts’ average predictions.
The good results were helped in considerable measure by lower fuel costs, which offset lower average passenger yields brought on by competition on key routes. “Our record first quarter results reflect lower fuel prices, but more importantly the tremendous loyalty of our customers in Seattle and across our system,” said Brad Tilden, the air group’s chief executive. “It is gratifying to see such strong growth and financial results given unprecedented competition. I want to thank our incredible employees who continue to rise to the challenge and deliver outstanding experiences to our customers.”
The challenge Tilden mentioned comes mainly from Atlanta’s Delta Air Lines, which has become Seattle-Tacoma International Airport’s second largest carrier. Delta has made Sea-Tac, which is Alaska’s principal hub, its West Coast hub for international and domestic flights. The airline, has added dozens of flights to its domestic schedule to and from Sea-Tac to support a gaggle of new overseas flights to Asia and Europe. In the process, Delta has entered many markets that have long been bread-and-butter routes for Alaska such as Seattle-Los Angeles, Seattle-San Diego and Seattle-Anchorage.
Alaska has reacted with a major expansion, adding nonstop flights to new destinations from Sea-Tac it had relied on partner airlines such as Delta to serve through their own hubs. Alaska’s good performance earned its own employees incentive pay and bonuses totaling $26 million in the quarter for meeting financial, safety and customer service goals.
In a conference call with analysts and journalists, the company shared several developments:
• Alaska will begin a limited program of selling preferred seating next month on its Boeing 737-800 and 737-900 aircraft. Unlike some airlines that have gone as far as charging extra fare for window and aisle seats, Alaska’s program typically will involve only three rows of seats per plane. Those are the exit row seats and the bulkhead seats, which offer more legroom than the remainder of seats on the plane. For an extra charge of about $15 a seat on a route of 1,000 miles or less, the passenger will receive the preferred seating, early boarding and a free drink, the airline announced. Prices will be higher on longer flights.
• Alaska has no interest in adding wide-body aircraft to its all-Boeing 737 single-aisle aircraft even for trips from the mainland to Hawaii. The advantages of a single fleet type are too good to depart from that practice, the airline said.
• The airline expects to enter more cooperative arrangements with American Airlines once that airline’s merger with US Airways is completed.