Alaska Airlines Sees Big Rebound in Tech Business Travel

Airlines Published 3 months ago on 23 April 2022 | Author TIN Media

The industry will benefit greatly from the reappearance of these corporate fliers. The resurgence of business travel has trailed behind that of leisure travellers, who have returned in droves since the summer of 2020. However, while holiday travellers and those visiting friends and relatives have helped fill planes, they have done it at a cheaper cost than road warriors. As a result, the resumption of corporate travel has become one of the most closely monitored things for airlines, with the return of big tech corporations posing a substantial challenge for carriers like Alaska and United Airlines, which rely heavily on demand in the major tech centres.

According to Alaska CEO Ben Minicucci, around 70% of 2019 corporate demand has returned. This contrasts with the airline's already fully healed leisure segment. And, according to Harrison, the return of business travellers aided yield increases in the first quarter, which increased by 9% in March compared to the same month three years ago, from an average of 3.5 per cent for the entire three-month period.

According to Harrison, Alaska's new codeshare agreement with American Airlines and participation in the Oneworld alliance have "opened up a lot of doors" for new corporate clients. However, he couldn't say how much this helped Alaska in the first quarter and said he expected a better picture by September.

Alaska isn't the only state where business travellers are returning to the skies. American's overall corporate demand reached 80% in the first quarter and is expected to reach 90% by June. Similarly, United executives have stated that business demand in the first quarter was 70% of 2019 levels, but had grown to 80% by March.

However, even as road warriors return, manpower shortages have slowed Alaska's comeback. During the second quarter, the airline aims to fly 6-9 percent fewer passengers than in 2019 and has lowered its full-year capacity forecast from up 1-3 percent just a month ago to flat to down 3 percent year-over-three-years. The biggest concern is pilot staffing and training, which resulted in an increase in flight cancellations at Alaska earlier this month.

"It's a matter of getting the pilots through the schoolhouse and out on the line," Minicucci explained. Alaska is on track to hire 600 mainline pilots and a "couple of hundred" for Horizon Air, its regional affiliate, this year, he said.

Minicucci stated that Alaska is confident in the availability of new pilots. The airline currently has about 500 trainees in its pipeline, which includes the recently inaugurated Ascend Pilot Academy flight training school as well as other pathway programs. Alaska also supports initiatives by Airlines for America (A4A), the Regional Airline Association (RAA), and other trade associations to increase federal funding for pilot training.

"Now you have to take control of your destiny," Minicucci said of airline pilot supply initiatives.

In the first quarter, Alaska recorded a net loss of $143 million. In comparison to 2019, revenues were down 10% to $1.7 billion, with expenses up roughly 2% to $1.9 billion. The hike was attributable to $75 million in charges connected to the early retirement of Alaska's Airbus A320s, as well as rising personnel costs, according to executives. On a 17 percent increase in unit costs excluding fuel, unit revenues climbed by less than 1% year over year. In the first quarter, Alaskans spent an average of $2.62 a gallon on gasoline, up 16 percent from the previous quarter.

Alaska's earnings prediction for the second quarter and the entire year remains unchanged. In the second quarter, total revenues are predicted to rise 5-8 percent compared to 2019, whereas unit expenses excluding fuel are expected to rise 16-19 percent year over year. Fuel costs are expected to increase by at least 14% from the first quarter.