Alaska readies for new competition in Seattle

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Alaska Air Group appears poised for new competitors in its west coast markets.

"There is an increase in capacity into San Francisco and Los Angles," Alaska Air Group chairman and CEO Bill Ayer said during an investors call today." [Those are] important markets to us that we're going to defend. Twenty-five percent of our capacity is to California and the Pacific Northwest."

The carrier previously said it would bolster frequency between Seattle and California in April following Virgin America's announcement that it would link Seattle with San Francisco starting in March and Los Angeles in April.

As those frequencies start Alaska says its bookings in January and February are up three points from the same time last year, notes CFO Brad Tilden, who also points to higher bookings in March. All three months have “solid” bookings in Alaska’s Hawaiian markets, he says.

As Alaska tries to manage higher fuel costs, the carrier expects a 5% rise in maintenance expenses this year, Tilden says, particularly for engine work on some of the carrier's older Boeing 737s. A 5% increase would translate into $157 million, an airline spokeswoman says.

The carrier will also retire seven of its last 14 Boeing MD-80s before summer and the remaining aircraft will be removed from the fleet during the last four months of the year, the spokeswoman says.

As previously reported, the MD-80s will be replaced by more fuel efficient 737-800s, of which Alaska Airlines will take delivery of 17 this year, followed by six in 2009, the spokeswoman explains.

“We have firm commitments for 15 -800s and options for 45 more -800s in 2009 and beyond,” she says.