For the better part of the past century, Alaska Airlines has focused on ferrying travelers across a relatively narrow slice of the US. It’s now thinking much bigger.
Alaska Air Group Inc., the owner of its namesake carrier and Hawaiian Airlines, laid out plans for a dramatic global expansion while boosting its profit forecast Tuesday, sending its shares surging the most in four years. The effort will begin in 2025 with the first-ever flights from its Seattle base to Asia, growing over the next five years to as many as 12 new overseas routes, including to destinations in Europe.
“We’re going to connect the west coast to the world and we’re going to do it now with the assets that we have that we didn’t have before,” Chief Executive Officer Ben Minicucci said.
The international expansion, which Minicucci revealed in an interview with Bloomberg and plans to detail at an investor meeting, would push Alaska well beyond its current route network and put it into greater competition with larger rivals like Delta Air Lines Inc. and United Airlines Holdings Inc. It would start with flights next year to Tokyo and Seoul.
The growth effort, capitalizing on Alaska’s recent acquisition of Hawaiian’s parent company, will help push incremental profit growth to more than $1 billion from the combined airline and earnings of at least $10 a share by 2027. Alaska now expects $300 million in incremental revenue and $200 million in cost savings from its Hawaiian Holdings Inc. acquisition.
The “short, medium and long-term targets unveiled ahead of their investor day likely come in well ahead of expectations,” Ravi Shanker, a Morgan Stanley analyst, said in a note. The airline is laying the groundwork to become “a transcontinental mainline carrier – a bold and transformative approach that could reframe the narrative of what Alaska is.”
Alaska also said adjusted earnings would be 40 cents to 50 cents a share this quarter, topping analysts’ estimates, on surprisingly robust demand for holiday travel this month and in November. That’s up from a prior forecast of no more than 40 cents.
For 2025, the airline expects per-share profit of at least $5.75, exceeding the $5.58 average from analyst estimates compiled by Bloomberg. The carrier will expand flight capacity as much as 3% over 2024.
Its shares jumped 18% after the markets opened Tuesday in New York, the biggest intraday gain since November 2020. The stock gained about 39% this year through Monday’s close.
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The Seattle-based airline, which traces its roots to McGee Airways in the early 1930s, has long served the US west coast. Helped by the $1.9 billion Hawaiian acquisition, which closed in September, Alaska has grown into the country’s fifth-largest carrier.
The merged company plans to take advantage of existing transpacific routes already flown by Hawaiian from Honolulu to Tokyo and Seoul at the start the new global push.
“Our long-term view is to create an international gateway out of Seattle and it’s going to benefit not only leisure customers, but corporate customers as well,” Minicucci said. “Europe is a natural place where people in the Pacific Northwest gravitate to, especially in the summer. So we’re going to look at points of interest in Europe and where our guests most likely want to go.”
Flights from Seattle to Tokyo’s Narita airport will start in May, with service to Seoul beginning in October. Additional major international destinations for Hawaiian include other cities in Japan, along with Auckland, Sydney, Samoa and Tahiti. The carrier, which has pledged to retain both the Hawaiian and Alaska brands, will develop a separate livery, or fuselage paint, for the international flights.
The routes will be flown on Hawaiian’s Airbus SE A330 widebody aircraft initially and Alaska’s eventual fleet of 12 Boeing Co. 787 Dreamliners.
Much of its future growth will focus on international routes with an emphasis on premium products. The percentage of premium seats in the combined fleet will increase to 29% from 26% now, Minicucci said. Revenue generated from those seats will climb to approximately 45% from 37%, Chief Financial Officer Shane Tackett told Bloomberg.
The airline also plans to offer a new premium credit card aimed at global travelers that comes with its popular companion fare benefit, among other perks. Cardholders will get a free ticket, excluding taxes, on Alaska or any of its partner airline networks, once a year after an initial purchase.
“We’re going to have a similar concept to go globally, not only on our network, but onto our partner networks as well, which I don’t think anybody offers,” Tackett said. “It’ll have other features that are focused on global travel as well.”
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Publish date : 2024-12-10 07:43:00
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