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 26 million passengers to 95+ 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 70% 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 (15%), for shorter distances. Regional airline Horizon sells all of its capacity to Alaska under a capacity purchase agreement. In a given year, Mainline operations carry about 18 million revenue passengers while regional operations, which includes Horizon, transport 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, nearly 10% 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.
Sales and Marketing
The airline tickets are distributed through the airline's website and through traditional and online travel agencies who use global distribution systems to obtain their fare and inventory data from airlines and reservation call centers located in Phoenix; Kent, Washington; and Boise, Idaho.
Alaska Air Group has seen its net revenue and profits steadily take flight over the years. The company has enjoyed four straight years of revenue growth, with net revenues increasing by nearly 8% from 2011 to 2012. Profits, too, were on the rise, jumping by 29% over that same time period.
The revenue growth was attributed to a 10% spike in mainline passenger revenue, which was driven by a 6% increase in capacity and a 3% increase in PRASM (the amount of passenger revenue earned per available seat mile). The capacity increase was attributed to new routes added in 2012, most of which were to and from Hawaii.
Regional passenger revenue increased 5%, driven by a 4% rise in capacity. Freight and mail revenue were up by 2%, primarily due to higher freight volumes and an increase in fuel and security surcharges, which offset a decrease in mail volumes.
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 fluctuating 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.
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.