Alaska to grow with increased discipline in 2013

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Alaska Airlines will increase capacity by 7% to 8% in 2013, but executives say that it will do so with increased focus on seasonal traffic flows.

Andrew Harrison, vice-president of planning and revenue management at the Seattle-based carrier, says that Alaska will add three new markets in 2013, during an earnings call on 25 October. The remainder of growth will come from upgauging as the airline replaces smaller Boeing 737s with 737-900ERs, he adds.

Alaska has announced no new services in 2013 to date.

The airline will receive nine 737-900ERs from Boeing and remove three 737-400s and three 737-700s from its fleet next year, according to an investor update on 25 October.

Harrison says that Alaska will be more focused on seasonal capacity discipline as it grows in 2013. Its operations to Alaska, the California Bay Area and Hawaii are areas where it is seeing some pressure on yields, he indicates.

"People talk about the fiscal cliff, I learned the hard way about the Hawaii to California [demand] cliff in September," he jokes. "The growth will subside to Hawaii and we'll get more focused on [capacity] discipline on the routes."

Alaska more than doubled capacity between the Bay Area and Hawaii during the third quarter versus 2011, says Harrison. The Bay Area includes Oakland, San Francisco and San Jose airports.

Competition from the Bay Area to points in the US mainland has also heated up. Harrison says that Alaska faces some "challenges" at San Francisco as low-cost carrier Virgin America now flies to all of the airline's markets from the city while an increase in industry capacity from the region's three airports to Portland is compressing yields in that market.

In its namesake state, Alaska has recently trimmed its capacity in a move that executives say is just "shoring up" its operations there.

Looking to the fourth quarter, the airline anticipates that capacity will increase by 7% compared to a year earlier, according to the update.

Cost per available seat mile excluding fuel and special items is expected to decline by 2.5% versus 2011 and Alaska anticipates an average cost of $3.46 per gallon for jet fuel during the period.

Advanced bookings for October are up 2.5 percentage points, November one percentage point and down 0.5 percentage points in December compared to a year ago, according to the update.