Whether you want to capture a Kodiak moment or down a daiquiri by the Sea of Cortez, an Alaska Air Group airplane can fly you there. Operating through primary subsidiary, Alaska Airlines, and regional carrier Horizon Air, the group flies more than 24 million passengers to 100+ destinations in the US (mainly western states including Alaska and Hawaii), Canada, and Mexico. The group's primary hub is Seattle (accounting for almost two-thirds of passengers), but it also flies out of key markets such as Portland, Oregon; Los Angeles; and Anchorage, Alaska. Alaska Airlines has a fleet of more than 115 Boeing 737 jets. Horizon Air operates about 50 Bombardier Q400 turboprops.
Accounting for 92% of revenue, the passenger segment's Alaska line is divided into Alaska Mainline, which makes flights with average stage lengths that are more than 1,000 miles, and Alaska Regional, for shorter distances. Regional airline Horizon sells all of its capacity to Alaska under a capacity purchase agreement. Mainline operations carried about 18 million revenue passengers while regional operations, which includes Horizon, carried about seven million revenue passengers, mainly in Washington, Oregon, Idaho, and California.
As its name would imply, the airline transports more passengers between Alaska and the US mainland than any other airline. Besides its own flights, the segment provides passenger service through contracts with SkyWest Airlines and Peninsula Airways. Carrying about 4% of all US domestic passenger traffic, the segment also includes such non-ticket revenue as reservations fees, ticket change fees, and charges for baggage service.
Freight and mail account for 2% of revenue. The Other segment, 6% of revenue, includes the Mileage Plan, on-board food and beverages, commissions from car and hotel vendors, and travel insurance. The Mileage Plan awards miles for flights on Alaska, Horizon, and partner airlines and sells miles to third parties.
Revenue rose about 13% in 2011 compared with 2010. In the Passenger segment, Mainline revenue increased about 15% over the same period thanks to an 8% jump in capacity and about a 6% bump in passenger revenue per available seat mile (PRASM). Regional revenue was up about 7% as the result of of a 13% rise in PRASM, which itself resulted from a 9% increase in ticket yield and a 3% jump in load factor. The Freight and Mail segment inched up just 2% on freight fuel surcharge increases. The Other segment enjoyed an uptick of about 9% mainly because of more Mileage Plan revenue and food and beverage sales. Net income, however, fell from more than $251 million in 2010 to more than $244 million in 2011.
Besides focusing on key markets such as Seattle and Los Angeles, another important component of Alaska Air's strategy includes marketing alliances with other airlines for reciprocal frequent flyer mileage credit and codesharing. Alaska has relationships with about a dozen major airlines, such as AMR's American Airlines, Air France, Delta Air Lines, and Qantas, as well as two other regional airlines besides SkyWest and Peninsula Air: Era Alaska and Kenmore Air.
Like the airline industry as a whole, Alaska Air has been challenged by rising fuel costs, which have been known to head up even higher in Alaska's operating territory of the West Coast than in the Gulf and East coasts. Alaska cushions itself against such volatility with crude oil call options, jet fuel refining margin swap contracts, and the acquisition of more fuel-efficient aircraft, including the Boeing 737-800 and 737-900ER. Fuel costs represented about 34% of total operating expenses in 2011, up from 27% in 2010.
For customer service Alaska Air offers a Baggage Service Guarantee and recently introduced Android and iPhone mobile applications for the airline's passengers. The company will continue focusing on improving its customers' experience, especially in the airport. Onboard, Alaska tries to set itself apart by not only providing Wi-Fi on most flights, but also by serving Starbucks coffee on some flights. – less