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 32 million passengers to more than 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 about 140 Boeing 737 jets. Horizon Air operates more than 50 Bombardier Q400 turboprops.
Alaska Air Group serves more than 100 cities through an expansive network in Alaska, the contiguous 48 states, Hawaii, Canada, and Mexico. The company leases operations, training, and aircraft maintenance facilities in Portland and Spokane, as well as line maintenance stations in Boise, Bellingham, Eugene, San Jose, Medford, Redmond, Seattle, and Spokane. It also leases call center facilities in Phoenix and Boise.
Accounting for 93% of revenue, the passenger segment's Alaska line is divided into Alaska Mainline (78%), which makes flights with average stage lengths that are more than 1,000 miles, and Alaska Regional (16%), 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 23 million revenue passengers while regional operations, which includes Horizon, transport more than 9 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, around 13% 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.
The company has increased its investment in advertising year-over-year; in 2015, the company spent $55 million on advertising, compared to $49 million in 2014.
Alaska Air has achieved unprecedented growth over the years, with revenues rising 4% to peak at a record-setting $5.6 billion in 2015. Net income also surged 40% to $848 million in 2015, another company milestone, mainly due to decreased expenses of aircraft fuel. In addition, its operating cash flow soared from $1.03 billion in 2014 to $1.58 billion to 2015.
The historic growth for 2015 was fueled by an 8% increase in mainline passenger capacity by new routes, the addition of seats to the existing fleet, and along with the delivery of 10 737-900ERs.
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.
In 2014, the company expanded its partnership with SkyWest Airlines with the addition of three new destinations from Alaska's Northwest hubs. SkyWest has purchased seven E175 aircraft to fly on behalf of Alaska Air. The first three aircraft will arrive in 2015, and the remaining four in 2016. Through this partnership the company will offer 298 peak-day departures to 81 destinations from Seattle. From Portland, starting in July 1015, Alaska Airlines plans to offer 125 peak-day departures to 44 destinations, more than any other carrier.
Mergers and Acquisitions
In a noteworthy move within the US airline industry, Alaska Air Group in April 2016 agreed to acquire Virgin America for $2.6 billion. The company expects the deal to boost its annual revenue by 27% and to add to its earnings within the transaction's first year. The combination will also create the fifth-largest US airline by traffic, replacing JetBlue, which currently holds that spot.