Alaska Air Group Inc., the parent company of Alaska Airlines Inc. and Horizon Air Industries Inc., held its Investor Day on March 24.
During the event, Alaska Air Group provided an update on its business performance and growth strategy, including successful pandemic recovery, industry outperformance in guest experience and financial strength, and its path forward for long-term value creation.
"The people of Alaska and Horizon are the foundation of our company and their kind-hearted spirit is why travelers choose to fly with us time and again," said Ben Minicucci, chief executive officer of Alaska Air Group. "The care and industry-leading service they provide and the operational excellence they deliver have allowed us to build incredible loyalty and drive results."
The previous day, Aviation Week Network's Air Transport World (ATW) named Alaska the 2022 ATW Airline of the Year, the top honor awarded among the 48th Annual ATW Airline Industry Achievement Awards, citing the company's unique strengths and leading performance.
"We're honored to be recognized by Air Transport World as the Airline of the Year – a testament to our people and to everything they've accomplished through the last few tumultuous years," added Minicucci. "Throughout our history, Alaska has consistently outperformed the industry, and we're well positioned to continue that trend, leveraging loyalty, alliances, network growth and our brand to unlock significant value and deliver $400 million of incremental revenue as part of our 2025 strategic plan. Accelerating our transition to single fleets while upgauging for growth is also a key part of that strategy. We care about growth because it enables us to create value for all who depend on us: greater opportunities for our employees, new jobs and increased service to our communities, and returns for our owners."
Runway for Profitable Growth
Members of Alaska's leadership team outlined the competitive advantages that underpin the company's industry-leading performance and strategic growth plan:
- Adding depth to our expansive network: Alaska plans to grow an average of 4-8% per year through 2025, in part by investing in the depth of its network. Alaska's 1,200 flights per day take guests to 120 destinations across North and Central America, including nonstop flights to transcontinental business routes and four Hawaiian Islands. Alaska's network has consistently produced industry-leading margins throughout its history and its measured approach to bringing capacity back post-pandemic enabled a return to profitability ahead of the industry. Together with the airline's global partners in the oneworld Alliance, guests can reach over 1,000 destinations while earning and redeeming miles on flights to locations around the world.
- Operating a single, more efficient fleet: The company shared plans to accelerate the transition of its fleet of 300+ aircraft to all-Boeing 737 for its mainline operations and all-Embraer E175 jets for regional, by the end of 2023. Consistent with Alaska's low-cost high productivity mindset, these transitions are expected to drive significant economic benefits. As the fleet grows to 400 aircraft by mid-decade, these will manifest through operational simplicity, flexibility and scalability, better fuel efficiency and reduced maintenance costs. The company is also growing cargo business operations by converting two passenger 737-800s to freighters, bringing the total freighter fleet to five.
- Delivering best-in-class care: The company will continue to invest in developing its people through its Pathways program, which cultivates talent from regional to mainline operations. In addition, it is developing the next generation of pilots and training existing employees for new jobs through its Ascend Pilot Academy. The company is also committed to making measurable progress on initiatives to advance diversity, equity and inclusion. With care central to everything Alaska Airlines does, the company will continue to invest in end-to-end guest experiences that deliver on its brand promise. The company announced infrastructure improvements for four of its main hubs – Seattle, Portland, San Francisco and Los Angeles. These investments total $2.3 billion in infrastructure upgrades that will provide a more seamless and enjoyable travel experience for guests and provide access to more gates and state-of-the-art lounges and lobbies.
- Growing Alaska's award-winning loyalty program with a renewed co-branded partnership: Alaska and Bank of America announced an extension of their co-branded credit card agreement through 2030. This agreement will enhance benefits for guests and drive improved profitability for the airline. Alaska's Mileage Plan is the industry's most generous loyalty rewards program, with miles earned based on flight distance rather than dollars spent and ability to earn and redeem to over 1,000 global destinations as part of oneworld Alliance. Alaska's co-branded credit card with Bank of America currently offers cardholders Alaska's Famous Companion Fare, free checked bag, the opportunity to earn 3x the miles on eligible Alaska purchases, 50 percent discount on day passes for Alaska Lounge access, 20 percent back on all inflight purchases and many other travel benefits.
- Preserving a resilient business model for long-term value creation: Alaska's legacy of industry outperformance is guided by strong principles for management and performance. The company published the guidelines that drive its financial sustainability and performance, providing additional transparency around its financial management principles and capital allocation approach. Key components include:
- Generating returns on capital that consistently exceed the industry and the company's cost of capital
- Managing the business and allocating capital with a long-term perspective and a consistent set of priorities
- Placing a high value on producing free cash flow consistently and sustainably
- Sustainable on all fronts: Alaska's commitment to long-term value includes prioritized ESG commitments to increase diversity at all levels, to reduce the company's impact on the climate, and to provide transparent accountability on key environmental, social and governance parameters. Last year, the airline set ambitious, but attainable sustainability goals, including being the most fuel-efficient U.S. airline and reaching net-zero carbon emissions by 2040. Further embedding these commitments into its culture, Alaska has linked a portion of its annual performance-based pay plan for all employees to the carbon intensity of the operation, and a portion of executives' compensation to achieving stronger BIPOC representation in leadership.
Full Year 2022 Outlook
"Alaska's team is committed to outperforming the industry, even while navigating a choppy pandemic recovery and near-term economic volatility," said Shane Tackett, executive vice president finance and chief financial officer of Alaska Air Group. "As people return to travel, they are choosing Alaska. And thanks to the caring spirit of our people, when guests try us, they tend to come back. We are excited for the path ahead and confident in our ability to continue creating value for our employees, guests, communities and shareholders."