Alaska Continues to Crush It In Summer, But It Has Winter Problems

Alaska announced its Q2 earnings yesterday, and the results were predictably very good. The airline beat estimates and came through with a 15.8 percent margin while running a solid operation. Sure, Q3 guidance was softer, but it has been for everybody and there’s some noise in there anyway. The reality is that Alaska just continues to do well… most of the time.

Winter continues to be a vexing problem for the airline. Specifically, it’s the time I call “darkest winter” — the post-holiday period until spring break picks up in late-February/early-March — that leaves Alaska trying to figure out what to do with all those airplanes.

I’m scratching the surface on Alaska in today’s post, but this week’s episode of The Air Show which comes out today has us going deeper into this very topic, including a look at my favorite new merger partner. And if you missed last week’s look at Delta, well, shame on you. You need to go subscribe now:

Listen on Spotify Listen on Apple Podcasts Listen on Amazon Listen on Pocket Casts

This year was easy. When the MAX 9 was grounded after that whole “plug door fall off” thing, the airline was scrambling to fly the schedule it had. But even with financial adjustments, the best it could have hoped for was a breakeven Q1. That’s better than losing a lot of money, but it’s not good enough.

I have to give Alaska credit. It knows this is a problem, and it has talked about it previously. Now, it has taken action. I’m just not sure how well this action will perform, but we’ll find out soon enough.

If you read the press release, you’d think Alaska was pushing forward this major expansion with 18 new routes. Really, it’s reorganizing resources. Yes, there are 18 new routes, and they fall into a variety of categories:

“Apple Vacations is Paying for This” Kansas City – Cancún, Puerto Vallarta St Louis – Puerto Vallarta “If You Pay Us — or Give Us a Revenue Guarantee — We Will Come” Los Angeles – Kelowna (I’m guessing, but I don’t actually know if there’s subsidy) Vail – San Diego, Seattle “We’ve Got Enough Juice in These Cities to Get People to Fill Our Planes to Warmer Climes” Boise – Bozeman, Orange County, Orlando Fresno – Guadalajara Sacramento – Los Cabos, Orlando, Puerto Vallarta, Tucson “People Beyond LA Like Costa Rica Too, Right?” Liberia – San Francisco, Seattle “Wait, We Don’t Fly That Already?” San Diego – Reno “We Have Slots to Use and This is the Best Idea We Could Come Up With” New York/JFK – Puerto Vallarta

There are a lot of different swings here. Some are guaranteed to be fine, if not spectacular, like Apple Vacations which will buy most of the seats to make the flight happen while letting Alaska still sell the rest of the seats as its own. Others can’t lose thanks to revenue guarantees like the one that Vail is giving for three years.

Then there is the build-up in secondary markets like Boise and Sacramento, markets that Alaska probably considers part of its “Heartland” the way Northwest used to dominate secondary cities in the Upper Midwest. It’s an interesting effort that may or may not be successful depending upon competitive response.

Experimentation is good, but I have to imagine that the chances of all of these working are slim to none. That’s the kind of thing you have to do in winter when you’re Alaska and you want to improve your fortunes.

What wasn’t in the press release was the fact that there are offsetting cuts being made. In other words, the 18 new routes are the best new ideas the airline has, and those will replace the worst ideas that it had previously. That’s not really fair. It’s not necessarily that these were bad ideas. They’re just ideas that didn’t work or aren’t expected to during darkest winter. So what goes away? Here’s a map showing the whole picture:

Alaska Add/Cut map generated by the Great Circle Mapper – copyright © Karl L. Swartz.

In this last week’s schedule filing with Cirium, Alaska removed all service from Bozeman to Los Angeles and Orange County along with San Diego to Cancún. It also suspended flying during darkest winter on these:

Portland: Atlanta, Minneapolis/St Paul San Francisco: Boston, Bozeman San Jose: Līhuʻe

Some of these may seem unsurprising, but San Francisco – Boston? Yep, it is suspended from Jan 6 through Feb 12. Alaska is struggling to fill some of those more business-y routes like this or Portland – Atlanta and MSP, so it is trying something different this coming winter.

This may very well help the airline do better next Q1, and that’s great. But the problem is, as Jon talks to us about on The Air Show this week, there are a lot of airplanes coming to this airline in the next few years. It doesn’t just need to make winter work with what it has. It needs to figure out how to put all of these new airplanes to productive use as well.

The more airplanes that arrive on property, the harder it’s going to be to make Q1 work. Then again, that is probably a bigger problem for another day. For now, it’s just trying to improve it’s fortunes in 2025.