Alaska plans continued capacity and productivity gains in 2013

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Alaska Airlines will continue to add significant capacity as it improves productivity this year.

The Seattle-based carrier maintains its plans to increase capacity by 7% to 8% while decreasing cost per available seat mile (CASM) excluding fuel by about 1% in 2013, says Brandon Pedersen, chief financial officer of Alaska, during an earnings call on 24 January.

Capacity is anticipated to grow by about 8.5% while CASM excluding fuel is flat during the first quarter, according to an investor update on the same day.

"We have been able now to reduce mainline unit costs 10 out of the last 11 years and much of that improvement has come from productivity gains and keeping a tight lid on overhead," says Pedersen. "Our play book for 2013 will have more of the same."

The biggest cost increases this year will be from rising employee medical expenses, increases in maintenance costs related to the heavy checks on its Boeing 737s and some end-of-lease return expenses, he explains.

Capital expenditure is anticipated to be $460 million this year and $420 million in 2014. This includes aircraft acquisition expenses of $330 million this year and $285 million in 2014.

"We have options that if exercised would increase those amounts, but we would only do so if we felt confident we could meet our return objectives," says Pedersen on the forward expenditure guidance. Alaska has options for 69 Boeing 737s from 2015 through 2024, and its subsidiary Horizon Air has options for 10 Bombardier Dash 8 Q400s from 2013 through 2015.

Alaska is slated to receive nine 737-900ERs this year.