Corporate travel’s lagging recovery has negatively affected shoulder seasons for Alaska Airlines, executives said on a Thursday earnings call.
“Demand remains strong in peak periods, but shoulder periods are becoming more susceptible to lower demand without a full return of corporate travel,” Alaska president and CEO Ben Minicucci said.
“Close-in demand for leisure looks to have normalized, and without further return of business demand, shoulder periods are more challenged than they have been in the past couple of years,” Alaska chief revenue officer and chief commercial officer Andrew Harrison concurred.
During the third quarter, “although not part of our baseline, we saw no upside benefit from corporate travel as revenue continues to hold at about 85 percent of 2019 levels,” Harrison said. As a result, the carrier is making some capacity shifts between business and leisure routes.
Harrison said the carrier is “focused on managing capacity prudently, including capitalizing on leisure destinations, including 15 new routes” in the first quarter of 2024, citing new service from Seattle and Los Angeles to Nassau, Bahamas. This “will bring in new revenue while also constraining our total capacity growth to low levels, and reducing business-heavy routes and frequencies,” Harrison said. “For example, we have trimmed our higher-frequency Pacific Northwest and California business seats 22 percent versus January and February of last year.”
Still, Harrison said the carrier is “beginning to see a little more strength come in on the corporate side,” particularly as employees return to the office, “but it’s still a long way off.” Between September and October, especially at high-tech clients, the carrier “started to see in some places for some accounts, a decent uptick in travel.”
Some larger technology companies have seen “quite a significant movement in volume,” depending on where they fly, Harrison said. Yields, however, were not where the carrier had seen them historically, “so I think this is still a moving subject.”
Alaska Q3 Metrics
Similar to American Airlines’ quarterly earnings results, Alaska reported flat third-quarter operating revenue and passenger revenue versus a year prior. Total revenue was $2.8 billion, while passenger revenue was $2.6 billion. One contributing factor to the flat performance was “significant fuel-cost headwinds given our geographic exposure to the West Coast,” Minicucci said. Quarterly average fuel costs were $3.26 per gallon. Net income was $139 million versus $40 million in Q3 2022.
Alaska’s fourth-quarter capacity guidance is for an increase of 11 percent to 14 percent year over year, with full-year capacity projected to be up 12 percent to 13 percent. Q4 revenue is anticipated to be up 1 percent to 4 percent, with 2023 total revenue up 7 percent to 8 percent versus 2022. Projected fuel costs are $3.30 to $3.40 per gallon for the fourth quarter and $4.25 to $4.75 for the full year.
In September, Alaska completed its transition to an all-Boeing fleet with the retirement of its A321neo aircraft. It reached an agreement to sell the 10 A321neos to American Airlines, with deliveries expected over the next two quarters, according to Alaska CFO Shane Tackett.
