Corp. Demand Up But Alaska Scales Back Capacity Plans

Business travel demand at Alaska Air Group continued to increase throughout the first quarter, and included what EVP and chief commercial officer Andrew Harrison called “a staggering increase” in such demand among large tech companies in the past two weeks. But other factors including a shortage of pilots have led the company to further cut full-year capacity projections below 2019 levels.

Alaska Airlines parent Alaska Air Group CEO Ben Minicucci on Thursday during the company’s first-quarter earnings call pointed to “staffing levels” as a key driver of the company’s decision to scale back capacity growth plans. Alaska now plans full-year capacity to be flat to down 3 percent from 2019 levels, compared with projected growth of 1 percent to 3 percent announced one month ago and an increase of 2 percent to 6 percent announced last quarter.

“We have hired 2,600 employees to date in 2022 with many of our work groups progressing as we expected against staffing plans,” Minicucci said. “However, throughput in our pilot training department fell short of our plan at the end of the quarter, and our teams are now working to accelerate throughput and to get us back on track for the year.”

Minicucci said the company planned to hire 600 mainline pilots and a “couple hundred” regional pilots. He also cited high fuel prices as well as plans to retire all Airbus A320 aircraft by early 2023 and all A321 aircraft by the end of 2023.

“We have faced more operational disruptions than is acceptable as we scale our business back with the primary issue being staffing levels,” Minicucci said.

Like other carriers, Alaska executives said the carrier has seen a sharp return of business travel particularly in the past few weeks. Business travel bookings today are 30 percent below 2019 levels, Harrison said.

Business travel demand from small and midsized companies has returned to 2019 levels, Harrison said, but the recovery in larger technology companies has been recent and dramatic, he said.

“What I’ve literally seen in the last two weeks is a staggering increase in the increase in flying for the large tech companies,” he said. “Some of the big ones have come back at the end of March and early April, where their traffic was down 80-plus percent. Just in the last week, one of the largest high-tech companies was only down 25 percent.”

Results and Forecasts

Alaska Air Group’s first-quarter passenger revenue increased 129 percent year-over-year to $ 1.51 billion. The company recorded a net loss of $ 143 million, compared to a net loss of $ 131 million in the first quarter of 2021. Total first-quarter revenue increased 111 percent year over year to $ 1.68 billion. Revenue in March exceeded 2019 levels for the first time since the pandemic began, according to the company.

Alaska projected second-quarter revenue to increase 5 percent to 8 percent from 2019 levels, with an estimated per-gallon fuel cost of $ 3.25 to $ 3.30.

RELATED: Alaska Air Group Q4 earnings

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