Alaska Airlines bets on efficiency to combat rising costs
Alaska's Horizon is upgrading its fleet of fuel-efficient Q400 turboprops as a way to trim fuel expenses.
Rising fuel costs, and strategies to stay profitable despite them, dominated Alaska Air Group Inc.'s first-quarter conference call Thursday.
The company reported its second-best ever net income for the first quarter, $28.3 million on $1.04 billion in revenues, partly a result of strategies to generate more revenue in the first quarter, normally the weakest of the year.
But looking forward, continued increases in fuel costs will challenge the company’s ability to fill planes and make money from those flights, suggested Brad Tilden, Alaska Air Group’s chief executive officer elect, who is replacing Bill Ayer, retiring as CEO on May 15.
We’re “cautiously optimistic about 2012 ... the biggest headwind is fuel prices,” Tilden said.
For instance, in the first quarter ended March 31, fuel costs climbed 64 percent to $319 million, compared with the same period in 2011.
“If fuel stays at current levels, it will add $180 million on the fuel bill, compared to 2011,” said Brandon Pederson, Alaska Air Group CFO.
To control fuel consumption, the company is focused on developing the most efficient fleet possible, executives said.
The most recent direction is swapping up to several larger aircraft, for instance replacing three Boeing 737-700s with larger 737-900ERs for Alaska Airlines, yielding slightly better fuel burn rates per seat.
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